HyperLiquid Delists JELLY After Trader’s $13M Short Squeeze Manipulation

In a dramatic turn of events, derivatives exchange HyperLiquid has delisted JELLY and forcefully closed all open positions following a $13.5 million vault loss linked to a price manipulation scheme.

How the Manipulation Unfolded

A trader, identified by on-chain analysts at Lookonchain, executed a calculated attack on HyperLiquid’s market-making vault, HLP, by exploiting JELLY’s low liquidity.

The trader first built a $4.85 million short position on HyperLiquid, betting on JELLY’s price to fall. Simultaneously, they purchased large amounts of JELLY on decentralized exchanges, artificially inflating its price and triggering a wave of liquidations. As HLP absorbed the short position, its unrealized losses ballooned to $13.5 million.

HyperLiquid’s Response: Forced Settlement & Reimbursement

With losses mounting, HyperLiquid forcefully settled the JELLY market at $0.0095, a fraction of the $0.50 price being fed to oracles from decentralized exchanges.

Citing “evidence of suspicious market activity,” HyperLiquid announced on X:

“The validator set has voted to delist JELLY perpetual contracts. Apart from flagged addresses, all affected users will be reimbursed by the Hyper Foundation based on on-chain data.”

The move sparked outrage across crypto social media, with industry figures like Newfound Research CEO Corey Hoffstein questioning the legitimacy of HyperLiquid’s intervention and whether it sets a dangerous precedent for exchange interference.

Binance Seizes the Moment

As HyperLiquid shut down JELLY trading, Binance stepped in, announcing futures contracts for JELLY, which sent the token’s spot price soaring 560%—adding another layer of chaos to the situation.

Echoes of Mango Markets & DeFi’s Vulnerability

The incident draws parallels to the 2022 Mango Markets exploit, where Avraham Eisenberg used oracle manipulation to drain millions from the platform. While the JELLY attacker did not secure massive profits, the case underscores the risks of low-liquidity tokens and the challenges exchanges face in maintaining fair market conditions.