Onchain derivatives platform Paradex has refunded $650,000 to approximately 200 users after a maintenance-related software error triggered unintended liquidations across multiple markets. According to a post-mortem shared on X, the incident occurred on Monday during a planned 30-minute database upgrade, when a "race condition" caused corrupted market data to be written onchain.
The incident unfolded shortly after Paradex initiated scheduled maintenance. Bitcoin and other cryptocurrency prices were briefly displayed as zero on the platform, which triggered the automated liquidation of thousands of leveraged positions within seconds. Users reported seeing their accounts forcibly closed as the system interpreted the zero prices as catastrophic market crashes.
Paradex confirmed that the issue stemmed from a technical error during database maintenance and announced a full rollback of the blockchain to a point just before the issue began. Clement Ho, Paradex's director of engineering, stated that the rollback would restore the exchange to its last known correct state. The team assured users that all funds were safe and restricted access to parts of the platform as engineers worked on recovery.
Paradex emphasized that the issue was operational and not the result of a hack or security breach. In response, Paradex temporarily disabled access to the platform and canceled all open orders except take-profit and stop-loss orders. The platform also restricted access to its block explorer and temporarily disabled trading functions while recovery operations proceeded.
The incident marked the first rollback of Paradex Chain, which the exchange described as "an undesired but necessary action to protect users and restore network integrity". While rollbacks are rare in crypto because they undo confirmed transactions, cutting against the idea that blockchains are meant to be final and predictable. Paradex's decision to rollback the chain unsettled some users, even though funds were ultimately restored. The rollback will restore all user accounts to their state immediately before the database maintenance began. This action reverses every trade, position adjustment, deposit, withdrawal, and liquidation that occurred after block 1604710, regardless of validity. While improperly liquidated users will see their positions restored, any profits earned after the rollback point will also be completely erased.
Paradex has implemented changes to prevent a recurrence, including updated service restart procedures, additional data validation checks, a revised scale-up process for full-downtime maintenance windows, and price-band protections during post-only trading periods.
Prior to the incident, Paradex processed nearly $1.6 billion in daily trades with $652 million in open interest. The exchange operates as a derivatives-focused appchain using Starknet infrastructure and raised $35 million in 2021 at a $400 million valuation.
The incident serves as a reminder of the operational risks inherent in crypto-native derivatives and the importance of robust incident response and data integrity controls in on-chain trading systems. It also highlights how operational and infrastructure failures, rather than hacks, can disrupt derivatives trading and crypto market access.
