Delphi’s Jason Pagoulatos Says Papertrade Is ‘Kind of Bait and Switching’ PAPER Holders

Papertrade’s Rule Change: A Bad Look, Not a Rug Pull

Delphi Digital’s head of markets, Jason Pagoulatos, weighed in on Papertrade’s decision to halt transfers of its PAPER token after users had already deposited roughly $140 million under the original terms. While he concurs that allowing free transfer of PAPER would open the door to price‑manipulation attacks, he criticizes the timing of the policy shift as “a bad look” and likens it to bait‑and‑switch tactics.

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Why Transferability Is a Risk

Papertrade, a high‑leverage trading venue built on Hyperliquid’s HyperEVM network, originally planned to enable off‑contract token transfers in a later phase. On Oct 19, the team announced that, for now, PAPER would not be transferable. Their rationale centered on preventing a market for shorting PAPER that could make manipulation of Bitcoin or Ether prices financially viable. In a hypothetical scenario, they argued that a $15 million attack on Bitcoin or Ether would be unprofitable, but adding a $10 million short on PAPER would make it “very viable.”

Pagoulatos echoed this concern, stating that an attack “will 100 % happen if the token is made transferable because anybody can whip up a perp market.” He noted that Papertrade had already manually blocked positions tied to large Hyperliquid orders that moved Ether’s price on launch day, underscoring the real‑world manifestation of the risk they were trying to mitigate.

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The Bait‑and‑Switch Accusation

The controversy stems from the fact that the $140 million in deposits were made under the expectation that PAPER would eventually become freely tradable. Pagoulatos described the post‑deposit rule change as “a bad look,” emphasizing that the team had “sold a bunch of people on a rule set beforehand, a bunch of money comes in, and now you change everything after the fact.” He stopped short of calling it a rug pull, but framed it as “kind of bait and switching you on the terms users signed up for.”

He also pointed out that the risk was disclosed in the original documentation, suggesting that “there is some blame to go around for everybody.” This nuance highlights the tension between transparent risk communication and the expectations set by early marketing.

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Impact on Users and Token Economics

Since its launch on Oct 10, Papertrade has distributed roughly $57 million to PAPER stakers, according to DefiLlama data. Daily payouts have fluctuated dramatically—dropping from about $1.3 million on Oct 20 to $88 000 on Oct 21 before rebounding to $1.07 million on Oct 22. Pagoulatos interpreted this volatility as evidence of “organic usage of people who want this type of thing,” rather than a wave of users simply farming the token to sell it.

He cautioned that the ecosystem will face “extremely tough” challenges moving forward, especially if the core incentive—earning PAPER by losing trades and staking for fee cuts—remains hamstrung by the transfer restriction.

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Looking Ahead

Papertrade’s decision underscores a broader dilemma in DeFi: balancing security against user expectations. While preventing token transfer may safeguard against manipulation, it also erodes trust when participants feel the rules have shifted after they’ve committed capital. Pagoulatos’ comments suggest that the community will need clearer, immutable governance frameworks to avoid similar fallout.

For now, users holding PAPER must navigate a token that cannot be moved off‑chain, while the platform works to refine its risk controls. Whether Papertrade can rebuild confidence without compromising security remains an open question—one that will likely shape how future high‑leverage protocols design their tokenomics and communication strategies.

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This article was produced with the assistance of AI tools and reviewed by the Unchained editorial team.