Hyperliquid (HYPE) Trader Loses $1 Million After Failed Market Manipulation

• The trader lost nearly $1 million when they attempted to manipulate the market for Hyperliquid with leveraged long and short positions.
• Hyperliquid acted, shutting down JELLY at $0.0095 to avoid a possible $240 million platform loss.
• HYPE token dropped 10% when trading volume increased 443%, reflecting market uncertainty.

A trader responsible for some of the recent “suspicious market activity” on Hyperliquid is facing a potential $1 million loss following the platform’s freezing and delisting of the meme coin JELLY memecoin. Arkham Intelligence reported that the trader deposited $7.167 million into three separate Hyperliquid accounts within a few minutes. 

Hyperliquid Delists JELLY Amid Controversy

The trader deposited $7.167 million across three separate Hyperliquid accounts,, two with  $2.15 million and $1.9 million, leveraging long-position and the third a $4.1 million short position while withdrawing collateral before the platform’s liquidation system could react. However, their strategy backfired, leading to significant financial losses.

The trader accumulated leverage by taking long positions valued at $2.15 million and $1.9 million and taking a short position of $4.1 million in the meanwhile. The strategy was to take advantage of the illiquidity in the market for the stock JELLY. But when the price of JELLY jumped by more than 400%, the short position got liquidated, and the trader lost heavily in the end.

Source: Arkhan Intelligence on X

When the short trade was too large to be liquidated in the short run, it was sent to the HYPE Provider Vault (HLP). Meanwhile, the trader withdrew collateral from the other two accounts, hoping to escape with profits. The exploit was detected by Hyperliquid, and the accounts were limited to reduce-only orders.

Hyperliquid’s Treasury Took a Short Position of $5M

Hyperliquid intervened by closing the JELLY market for $0.02024, which effectively nullified the floating PnL on the exploiter’s accounts. The trader had withdrawn $6.26 million, but at least $1 million remains trapped in the system. If they can withdraw the remaining amount, their total loss will be around $4,000.

Hyperliquid delisted perpetual futures linked to JELLY due to market manipulation concerns. The platform is now in the crosshairs regarding risk management practices. Analysts say regulatory authorities will increase oversight if the platform does not correct underlying vulnerabilities that facilitated the attempt at market manipulation.

The scandal started when Hyperliquid’s treasury shorted JELLY for $5 million. When the price of the token rose, the losses reached $10.63 million. At a price of $14.60 and market cap $4.86B, HYPE faces a decline of 22.98% in the previous month, illustrating the risk of the lack of market protection. 

Source: Tradingview

Read More: HYPE Unstaking Alert: 1.5M Tokens About to Flood the Market