Trader’s $7M Bet on JELLYJELLY Leads to $1M Loss on Hyperliquid

• A trader deposited $7 Million and managed to manipulate JELLYJELLY on Hyperliquid.
• The trader faced a near $1M loss after their market manipulation attempt failed.
• Following some significant losses caused by the trader, Hyperliquid delisted JELLYJELLY.
  

A trader’s $7.167 million deposit across three accounts on Hyperliquid has resulted in significant losses. Within five minutes, the trader used three separate accounts to trade the illiquid JELLYJELLY token. Despite the hefty deposits, the trader is now facing a nearly $1 million loss. The market volatility surrounding the illiquid token, combined with attempts to manipulate prices, led to unrealized losses. Arkham Intelligence, a blockchain analytics firm, confirmed the trader still has over $900k trapped on the platform.

Suspicious Activity and Market Manipulation

The trader created three accounts in just five minutes. Two of these accounts took long positions worth $2.15 million and $1.9 million in JELLYJELLY. The third account entered a $4.1 million short position, aiming to offset the long holdings. Arkham Intelligence revealed that the trader sought to manipulate the market by taking out collateral before Hyperliquid’s liquidation algorithm could adjust to the trades.  

Source: X

At 12:43 UTC, the trader’s last attempt to withdraw funds failed. Their account was restricted from reducing short positions at 12:50 UTC. Rather than withdrawing, the trader opted to sell their JELLY position, which was executed from the 0x20e account. This resulted in the market closing at 0.0095 around 15:00 UTC, the price at which the third account entered short positions. This triggered the liquidation of the long positions in the other two accounts, erasing all floating PnL.

Hyperliquid’s Response: JELLYJELLY Delisting

In response to the market manipulation, Hyperliquid delisted the JELLYJELLY perpetual futures. This came after the trader’s $6 million short position on JELLYJELLY was liquidated, pushing the token’s price higher. As a result, the position was absorbed by the Hyperliquidity Provider (HLP) vault, leading to nearly $12 million in unrealized losses.

Following the discovery of the manipulation, Hyperliquid’s network validators voted to remove the JELLYJELLY contract. The Hyper Foundation pledged to cover the majority of losses, excluding those from blacklisted addresses. Blockchain data will facilitate automatic payments to users affected by the exploit. 

Related: Hyperliquid Whale Shorts Bitcoin with $520 Million Position

Previous Losses on Hyperliquid

This is not the first significant loss faced by Hyperliquid. Earlier in March, the exchange saw a whale liquidate a $200 million long position in Ethereum, incurring a $4 million loss. These incidents raise concerns about the platform’s liquidation process, particularly in volatile markets like memecoins.

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