Hyperliquid has delisted JELLYJELLY perpetual futures after detecting suspicious market activity that caused significant losses. A trader opened a $6 million short position on JELLYJELLY and then pumped the token’s price on-chain to force their own liquidation. This resulted in the Hyperliquidity Provider (HLP) vault absorbing the position, leading to around $12 million in unrealized losses.
Following the incident, Hyperliquid’s network validators voted to remove the JELLYJELLY contract. The exchange announced that most users, except for flagged addresses, would be reimbursed by the Hyper Foundation. Payments will be processed automatically based on blockchain data. This marks the second major loss for Hyperliquid’s HLP in March. Earlier, a whale liquidated a $200 million ETH long position, causing a $4 million loss.
JELLYJELLY, a token created by Venmo co-founder Iqram Magdon-Ismail for his JellyJelly Web3 social media project, initially had a market capitalization of around $250 million before plummeting to single-digit millions. As of March 26, the token was valued at roughly $25 million, with its price surging to $0.043 before settling at $0.023, a 73% increase over the past day.
Hyperliquid runs on a high-speed blockchain built on Ethereum’s layer-2 network, Arbitrum. Though it markets itself as a decentralized exchange for leveraged perpetual trading, critics have questioned its centralization. In December, wallets linked to North Korea were found using the platform. The decision to manually override JELLYJELLY’s oracle price and delist the contract raised further concerns, with BitMEX co-founder Arthur Hayes commenting , “Let’s stop pretending Hyperliquid is decentralized.”
Meanwhile, Binance and OKX listed JELLYJELLY perpetual futures, leading to speculation that centralized exchanges were capitalizing on Hyperliquid’s struggles by increasing trading volume for the token. In response, Hyperliquid raised maintenance margin requirements to 20% for certain leveraged positions to mitigate further risks.
This situation echoes an event from March 12, when a whale built a $306 million ETH long position, withdrew $17 million USDC, and profited $1.86 million. Rumors suggested an exploit, but Hyperliquid denied the claims, stating that its trading engine could not handle such a large position.
As the exchange works to stabilize operations, its native token, HYPE, dropped by as much as 22% before slightly recovering to trade about 10% lower. Hyperliquid has assured users that it will implement technical improvements to prevent similar market manipulation in the future.
