By Key Points
- Arkham says exploiter may lose nearly $1M from risky trades
- $6.26M was withdrawn but some funds remain frozen
- Hyperliquid froze JELLY token and locked suspicious accounts
- Similar exploit strategies are rising across the platform
A trader accused of manipulating the market on Hyperliquid is now facing potential losses of nearly $1 million, according to blockchain analytics firm Arkham Intelligence. The trades, which centered around the memecoin Jelly my Jelly (JELLY), caused wild price swings and eventually forced Hyperliquid to freeze and delist the token’s perpetual futures.
This is just the latest case highlighting rising concerns over suspicious trading behaviors and the security of DeFi platforms, especially in high-volatility, low-liquidity markets.
Hyperliquid just got exploited. What happened?
A trader deposited $7.167M on 3 separate Hyperliquid accounts within 5 minutes of each other. He then made leveraged trades on an illiquid coin, JELLYJELLY.
However, he ended up losing money, and is down almost $1M unless… pic.twitter.com/uNyMwLS5Sc
— Arkham (@arkham) March 26, 2025
Inside the Hyperliquid JELLY Exploit Setup
Arkham’s detailed report explains that the trader created three new accounts within five minutes, carefully orchestrated to manipulate price movements.
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Two of the accounts opened long positions totaling $4 million
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A third opened a $4.1 million short position, effectively hedging the previous trades
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This setup allowed the trader to inflate leverage and try to bypass the platform’s liquidation controls
When the price of JELLY pumped over 400%, the massive short position triggered a liquidation. But due to its size, it wasn’t handled immediately. Instead, it was passed to the Hyperliquidity Provider Vault (HLP) — a safeguard system that covers large liquidations.
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
At the same time, the trader withdrew collateral from the two long accounts, while sitting on 7-figure paper profits. But Hyperliquid intervened by switching the accounts to reduce-only mode, preventing further trades. The trader was then forced to sell the tokens manually, hoping to recover what they could.
For a deeper look at Hyperliquid’s growing list of suspicious trades, check out our post on the rise in money laundering fears after similar activities.
$6.26M Pulled, But Millions May Be Lost
In total, the trader managed to withdraw around $6.26 million. However, Arkham reports that at least $1 million is still stuck in the locked accounts. If the trader cannot withdraw it in the future, their net loss from the exploit could hit seven figures.
Hyperliquid responded by closing the JELLY token market at $0.0095 — exactly matching the short entry price. This move eliminated any floating profits from the two long accounts, neutralizing the exploit and protecting remaining platform liquidity.
This situation closely mirrors the massive $420M battle sparked by a whale Bitcoin short that rocked Hyperliquid earlier this month, where intentional liquidations drained millions from the platform’s liquidity pool.
Traders are now exploiting platform mechanics by intentionally pushing large leveraged positions toward liquidation. It’s becoming a dangerous trend, with some users even calling it a “democratized liquidation game.”
These incidents are raising big questions about risk controls on decentralized exchanges. They also reveal how quickly platform vulnerabilities can be weaponized in high-stakes environments.
A Pattern of Risk and Regulation Pressure
The Hyperliquid JELLY incident is not happening in a vacuum. Just this month, regulators in South Korea made headlines by blocking 17 foreign crypto exchanges — a bold move to tighten oversight amid growing concerns over unregulated trading activity.
Meanwhile, centralized exchanges aren’t immune either. Recently, Binance faced intense scrutiny over a $38 million market maker controversy, prompting a crackdown. These stories paint a broader picture of how both centralized and decentralized platforms are struggling with transparency, fairness, and security.
Still, there’s innovation happening. Binance also made a bold move with its internal wallets that sparked a 24x surge in trading volume — showing how bold strategic decisions can also shift the market landscape.
In the case of Hyperliquid, however, it’s clear that platform design and security measures need upgrades. As exploit tactics become more advanced, so too must the systems that protect liquidity and ensure fair trading.
The Hyperliquid JELLY episode is a reminder of the tightrope walk between decentralization and system control, especially as crypto markets become more sophisticated. With millions of dollars at stake in mere minutes, trading platforms must evolve fast — or risk being outplayed by their own users.
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