GMX has successfully completed its compensation plan for GMX Liquidity Provider (GLP) holders on Arbitrum affected by the V1 vulnerability that occurred in July. The compensation plan amounted to approximately $44 million and was distributed in GLV tokens, with support from the DAO treasury and retention incentives.
The announcement was made by GMX on August 13, marking the conclusion of the final distribution round for the compensation plan. Affected wallets were fully reimbursed, and additional incentives were offered to encourage holders to retain the distributed funds.
The exploit that occurred on July 9 targeted a re-entrancy flaw in GMX V1’s GLP pool, allowing an attacker to manipulate short average prices for Bitcoin and drain around $42 million in assets. Following the exploit, GMX took swift action by halting GLP trading, minting, and redemption on Arbitrum and Avalanche. Through negotiations, the platform managed to recover approximately $37.5 million under a white-hat bounty arrangement, while the attacker retained around $5 million.
The compensation plan, which was approved through a community Snapshot vote, involved distributing GLV tokens to eligible GLP holders. These vaults contained a mix of Wrapped Bitcoin, Ethereum, and stablecoins, similar to GLP’s pre-exploit composition. The GMX DAO provided $500,000 in retention incentives to holders who kept their GLV tokens for three months and covered a $2 million shortfall using its treasury. Additionally, GLP held by the white-hat was burned to restore proportional value.
GMX V2, which remained unaffected by the exploit, has continued to see strong trading activity and rising liquidity. The DAO is now focused on developing tailored recovery solutions for decentralized finance protocols that integrated GLP, with GLP redemptions expected to resume in the near future.
Despite the exploit causing a temporary drop in GMX’s token price and total value locked, the platform has since recovered with total value locked surpassing $600 million. With V1 paused and scheduled for eventual sunset, GMX’s attention is now fully directed towards its V2 infrastructure and further enhancing its offerings in the decentralized finance space.