How Does the Exchange’s Insurance Fund Relate to Losses from Market Manipulation or an Attack?

An exchange's insurance fund is a pool of capital designed to cover losses that exceed the margin of liquidated traders, preventing the exchange from having to "claw back" profits from winning traders. In the event of a successful 51% attack that causes sudden, massive market manipulation and unrecoverable losses from liquidations, the insurance fund acts as a buffer.

It absorbs the shortfall, protecting the exchange's solvency and maintaining market stability for other users.