Source: Cointelegraph.com NewsSuspicious trading activity led decentralized exchange Hyperliquid to delist the Jelly-my-Jelly (JELLY) memecoin, with details of an exploit unraveling over the course of a few days.\u00a0
\nThe decentralized finance sector has already seen historic exploits in 2025, as the space struggles with issues of oversight and security. The Bybit hack saw North Korean hackers get away with $1.4 billion in February alone.
\nThe JELLY incident, in which a whale exploited the Hyperliquid exchange\u2019s liquidation parameters, getting away with millions, is just the latest exploit to rock the industry.\u00a0
\nObservers roundly criticized Hyperliquid\u2019s reaction to the short squeeze, with one even comparing it to the ill-fated FTX. Here\u2019s a look at how the incident unfolded.
\nJelly token price crashes ahead of Hyperliquid exploit
\nVenmo co-founder Iqram Magdon-Ismail launched the JELLY token as part of the JellyJelly Web3 social media project. Following the launch on Jan. 30, the token price crashed from $0.21 to just $0.01 some 10 days later.\u00a0
\nJelly-my-Jelly token price lost most of its value in the first two weeks of trading. Source: CoinMarketCapWhile the coin\u2019s market cap initially boasted almost a quarter of a billion dollars, by March 26 it had a market cap of roughly $25 million.
\nA short squeeze of JellyJelly
\nThe short squeeze on the JellyJelly token took place over the course of just a few hours on March 26. According to a postmortem by Arkham Intelligence, this is how it went down:<\/p>\n
The exploiter deposited $7 million on three separate Hyperliquid accounts, making leveraged trades on the illiquid Jelly token.
\nTwo accounts took $2.15 million and $1.9 million long positions on JELLY, while the other took a $4.1 million short position to cancel the others out.
\nAs the price of JELLYJELLY increased, the short position was liquidated, but it was too large to be liquidated normally.
\nThe short position was passed to the Hyperliquidity Provider Vault (HLP).
\nThe exploiter meanwhile had a seven-figure PnL from which to withdraw. By this point, the price of JELLY had pumped 400%.
\nThe exploiter began to pull withdrawals but Hyperliquid soon restricted their accounts. Instead of attempting further withdrawals, they began to sell their JELLY position.<\/p>\n
Hyperliquid shuts down Jelly market Source: Cointelegraph.com NewsSuspicious trading activity led decentralized exchange Hyperliquid to delist the Jelly-my-Jelly (JELLY) memecoin, with details of an exploit unraveling over the course of a few days.\u00a0 The decentralized… <\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[5],"tags":[],"_links":{"self":[{"href":"http:\/\/cryptospotters.net\/index.php?rest_route=\/wp\/v2\/posts\/126009"}],"collection":[{"href":"http:\/\/cryptospotters.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/cryptospotters.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"http:\/\/cryptospotters.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=126009"}],"version-history":[{"count":0,"href":"http:\/\/cryptospotters.net\/index.php?rest_route=\/wp\/v2\/posts\/126009\/revisions"}],"wp:attachment":[{"href":"http:\/\/cryptospotters.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=126009"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/cryptospotters.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=126009"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/cryptospotters.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=126009"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nAs the trader began to sell their remaining Jelly position, Hyperliquid shut down the market for the token. According to Arkham, the exchange closed the market with Jelly at $0.0095, the price at which the third account had entered its short trades.\u00a0
\nHyperliquid announced on X that it would delist perpetual futures trading for the JELLY token, citing \u201cevidence of suspicious market activity.\u201d
\nRelated: Long and short positions in crypto, explained
\nThe exchange said, \u201cAll users apart from flagged addresses will be made whole from the Hyper Foundation. This will be done automatically in the coming days based on onchain data.\u201d\u00a0
\nIt further acknowledged the hit the HLP took when saddled with the long positions but said that the HLP\u2019s positive net income was $700,000 over the last 24 hours: \u201cTechnical improvements will be made, and the network will grow stronger as a result of lessons learned.\u201d
\nCrypto observers criticize Hyperliquid\u00a0
\nSome market observers weren\u2019t very impressed with how Hyperliquid handled the situation. The CEO of Bitget, Gracy Chen, wrote, \u201cThe way it handled the $JELLY incident was immature, unethical, and unprofessional, triggering user losses and casting serious doubts over its integrity.\u201d
\nShe said that the exchange \u201cmay be on track to become FTX 2.0\u201d and that the decision to close the Jelly market and settle positions at a favorable price \u201csets a dangerous precedent.\u201d\u00a0
\nAlvin Kan, chief operating officer at Bitget Wallet, told Cointelegraph that the Jelly meltdown was just another example of how capricious hype-based price action can be.\u00a0
\n\u201cThe JELLY incident is a clear reminder that hype without fundamentals doesn\u2019t last […] In DeFi, momentum can drive short-term attention, but it doesn\u2019t build sustainable platforms,\u201d he said.\u00a0
\nThe market will continue to expose projects that are built on speculation, not utility, he concluded.\u00a0
\nArthur Hayes, the founder of BitMEX, seemed to imply that reactions to the Jelly incident were overblown, writing on X, \u201cLet\u2019s stop pretending hyperliquid is decentralised. And then stop pretending traders actually give a fuck.\u201d\u00a0
\nSource: Arthur HayesThe exchange had already taken action regarding leveraged trading earlier in March, increasing margin requirements for traders after its HLP lost millions of dollars during a large Ether liquidation.\u00a0
\nRelated: Hyperliquid ups margin requirements after $4 million liquidation loss
\nStill, Hayes could be right \u2014 \u201cdegen\u201d traders who are at peace with the risk of DeFi may just eat the losses and continue onward. Furthermore, it doesn\u2019t appear that a clear legal framework for DeFi is coming anytime soon, at least not in the United States. There may be no pressure or oversight, other than user reactions, to make \u201cdecentralized exchanges\u201d change their ways.\u00a0
\nThe true irony of the exploit is that it seems everyone lost out \u2014 the exchange, traders, and even the exploiter.
\nIn total, the trader deposited $7.17 million into their accounts but was only able to withdraw $6.26 million, with a balance of around $900,000 still remaining on their Hyperliquid accounts. If they are able to get the funds back, the exploit will cost them around $4,000; if not, it could have cost them almost $1 million.\u00a0
\nMagazine: Arbitrum co-founder skeptical of move to based and native rollups: Steven GoldfederRead More<\/a><\/p>","protected":false},"excerpt":{"rendered":"