The cryptocurrency trading platform Hyperliquid is currently under scrutiny following questionable actions by a trader dubbed the “exploiter.” According to blockchain analytics, this trader stands to be down nearly $1 million due to their activities that disrupted the market for the Jelly my Jelly (JELLY) memecoin. This incident has led to the suspension and subsequent delisting of the token from the platform, triggering a significant discussion within the crypto community.
In a detailed analysis published by a blockchain intelligence firm, it was revealed that the trader engaged in suspicious market manipulation. Within the span of just five minutes, they opened three trading accounts, recording long positions of $2.15 million and $1.9 million on two accounts and a significant short position of $4.1 million on the third. The objective was to leverage their position by withdrawing collateral swiftly before Hyperliquid’s liquidation mechanism could respond.
As the price of JELLY surged over 400%, the trader’s short position faced immediate liquidation challenges. The size of the position was too large for the system to process efficiently, instead transitioning to the Hyperliquidity Provider Vault (HLP) which was intended to handle such scenarios. During this turbulent time, the trader withdrew substantial collateral leaving them with a reportedly seven-figure account balance. However, they soon encountered restrictions that limited their ability to execute trades, forcing them to liquidate tokens just to regain access to some of the funds.
Following the tumult, the JELLY token market was ultimately closed by Hyperliquid at a price matching the trader’s short trade, effectively zeroing out the floating profit and loss on the trader’s earlier accounts. The total amount withdrawn was reported to be $6.26 million, yet it is estimated that at least $1 million remains locked in the trader’s accounts. If these funds cannot be secured, the overall loss could reach close to $1 million
Further complicating matters, the platform had previously adjusted its trading policies after facing similar incidents, notably an event on March 14 that resulted in a significant loss during an Ether liquidation. Traders on Hyperliquid have also engaged in aggressive tactics aimed at executing substantial trades against larger positions, characterizing a trend of strategic liquidations. This escalates the concerns about market integrity and highlights the increasing volatility in decentralized exchanges.
