TL;DR
- A user manipulated JELLY on Hyperliquid and made over $6 million by exploiting the platform’s liquidation system.
- Although Hyperliquid removed JELLY, the attacker still holds 10% of the total supply on Solana, valued at $1.9 million.
- The manipulation exposes vulnerabilities in the DeFi sector and reopens the debate on decentralization and the need for market controls.
An anonymous user made over six million dollars by manipulating the price of the JELLY memecoin on Hyperliquid. The strategy involved opening long positions and a larger short position to avoid immediate liquidation. When the token’s value rose by 400%, the platform’s liquidation system absorbed the loss from the short position, allowing the attacker to profit.
Despite Hyperliquid removing JELLY from its platform due to suspicious activity, the perpetrator still holds approximately 10% of the total supply on the Solana network. Blockchain investigations indicate that five addresses linked to the attacker hold around $1.9 million in tokens acquired since March 22.
The attacker’s last withdrawal was at 12:43 UTC. However, he continued to attempt withdrawals – but was unable to, since his account was restricted to reduce-only orders at 12:50 UTC.
However, his accounts still had millions of dollars in unrealized PnL.
Instead of withdrawing,… pic.twitter.com/T9XcL35rCr
— Arkham (@arkham) March 26, 2025
The incident highlights vulnerabilities in the liquidation systems of decentralized exchanges. The Hyper Foundation, responsible for Hyperliquid’s ecosystem, announced it will automatically reimburse affected users, except for the addresses linked to the exploiter. However, the intervention to mitigate the impact of the manipulation raises questions about the platform’s level of decentralization.
The Debate on the Intervention of Hyperliquid
Frauds involving memecoins have increased in recent months. Recently, another token inspired by The Wolf of Wall Street collapsed by over 99% shortly after its launch, affecting investors who were unaware of the initial distribution of the supply. These cases serve as proof of the risks of investing in projects without real utility or solid backing.
The DeFi sector constantly faces the challenge of maintaining decentralization while implementing mechanisms to protect against market manipulation. While some defend platform intervention in extreme cases, others argue that such actions contradict the principles of blockchain technology. Without clear regulations, projects will continue to be exposed to speculative practices that can result in significant losses for users
