HyperLiquid Delists JELLY After $13M Vault Squeeze Sparks Controversy
In a dramatic turn of events, derivatives exchange HyperLiquid has delisted JELLY and forcibly closed all open positions after a trader allegedly manipulated the token’s price, causing a $13.5 million unrealized loss for its HyperLiquidity Provider (HLP) vault.
How the $13M Liquidation Unfolded
HLP, an automated market-making vault integrated with HyperLiquid’s liquidation engine, suffered massive losses when a trader executed a calculated strategy combining on-chain spot purchases with short positions on HyperLiquid.
According to Lookonchain, the trader initially held $4.85 million worth of JELLY, shorted the asset on HyperLiquid, and then aggressively bought JELLY on decentralized exchanges, artificially pushing the price up. This price spike liquidated the short position, forcing HLP to inherit it at an inflated valuation.
Because JELLY’s liquidity on decentralized exchanges was low, the trader was able to move the price significantly, amplifying HLP’s losses. At one point, HyperLiquid’s native token (HYPE) plunged 20% as panic set in.
HyperLiquid’s Response: Delisting and Forced Settlement
To contain the crisis, HyperLiquid forcefully closed the JELLY market, settling it at $0.0095—far below the $0.50 price being fed to oracles from decentralized exchanges.
“After evidence of suspicious market activity, the validator set convened and voted to delist JELLY perps,” HyperLiquid posted on X. “All users apart from flagged addresses will be made whole from the Hyper Foundation. This will be done automatically in the coming days based on on-chain data.”
While HyperLiquid compensated affected traders, the decision sparked outrage across the crypto community, with some questioning the legality of the forced settlement. Corey Hoffstein, CEO of Newfound Research, was among those raising concerns.
Binance Seizes the Moment
As the dust settled, Binance saw an opportunity—announcing the launch of JELLY futures. The move sent spot prices skyrocketing by 560%, adding another layer of volatility to an already chaotic event.
A Modern-Day Mango Markets Exploit?
This case draws parallels to Mango Markets’ infamous 2022 exploit, where trader Avraham Eisenberg manipulated oracle prices to extract millions from derivative markets—a move he later described as a “highly profitable trading strategy.”
While the JELLY incident didn’t yield massive profits for the attacker, it underscores the ongoing risks in crypto derivatives markets—and the delicate balance exchanges must strike between market integrity and intervention.
