Hyperliquid Whale’s Manipulation Ends in Losses, Exact Figures Unknown

A trader exploiting the liquidation mechanism on the decentralized exchange Hyperliquid in perpetual contracts for the JELLYJELLY token retains a balance of approximately $900,000 on the platform.

In total, the exploiter deposited $7.17M to 3 Hyperliquid accounts and withdrew $6.26M, with ~$900K balance on Hyperliquid across two accounts which he is currently unable to withdraw.

Assuming he can withdraw this at some point in the future, his actions on Hyperliquid have… pic.twitter.com/nq2IROQHjD

— Arkham (@arkham) March 26, 2025

Even if he manages to withdraw the assets, the loss would amount to about $4,000, experts at Arkham noted.

The investor opened two long positions in the token worth $2.15 million and $1.9 million. A short position of $4.1 million served as a hedge.

A ~400% pump in JELLYJELLY’s price triggered the liquidation of the short, but due to its volume, the assets were transferred to the Hyperliquidity Provider Vault.

Meanwhile, the manipulator continued to withdraw collateral from the longs, having approximately $11 million in unrealized profits.

The exchange halted trading of JELLYJELLY contracts by a decision of the validators due to “suspicious market activity.” The whale managed to withdraw about $6.2 million.

Community Questions Hyperliquid’s Decentralized Nature

“The way Hyperliquid handled the incident was immature, unethical, and unprofessional, leading to user losses and raising serious doubts about its commitment to principles. Despite positioning itself as an advanced DEX with an innovative approach, it operates more like an offshore CEX without KYC/AML, facilitating flows of illicit funds and unscrupulous players,” commented Bitget CEO Gracy Chen.

#Hyperliquid may be on track to become #FTX 2.0.

The way it handled the $JELLY incident was immature, unethical, and unprofessional, triggering user losses and casting serious doubts over its integrity. Despite presenting itself as an innovative decentralized exchange with a…

— Gracy Chen @Bitget (@GracyBitget) March 26, 2025

She noted:

• the forced closure of positions created a dangerous precedent;
• Hyperliquid’s product design contains critical flaws in the form of mixed vaults and the absence of limits, exposing users to systemic risk;
• the platform could be subject to manipulation in other altcoins, theoretically threatening “the next industry catastrophe.”

“Hyperliquid could become the next FTX,” concluded Chen.

In 2023, the exchange’s founder Jeff Yan criticized the approach of industry venture investors, who, in his view, support “dubious projects” like LUNA.

1/ Huge respect for Dragonfly continuing to invest in the bear market.

But I’m morally obliged to call out sketchy projects gaining momentum.

As a community we must preempt large scale implosions like #FTX or #LUNA that set the industry back years

Bitget may be the next FTX ? https://t.co/R6JkTstXpV

— jeff.hl (@chameleon_jeff) April 5, 2023

The entrepreneur directly pointed to Bitget as the next “potential FTX.”

The price of Hyperliquid’s token (HYPE) fell from $16.3 to $13.5 amid the incident. It then recovered to around $14.4 (CoinGecko).

“Let’s stop pretending Hyperliquid is decentralized. And then let’s stop pretending traders care. I bet HYPE will soon return to its original position because degens will degen,” wrote BitMEX co-founder and former CEO Arthur Hayes.

Users online responded to the incident of the exchange’s forced closure of positions by reworking a well-known internet meme.

Current state of Hyperliquid pic.twitter.com/IOSiisfACW

— MoneyPrinterGoBrrr (@printer_brrr) March 26, 2025

In their view, Hyperliquid’s actions do not align with the principles of decentralization.

Experts at 10x Research noted that the platform’s transparency enabled a “public hunt” on leveraged whales to liquidate their positions.