Hyperliquid removed JELLYJELLY from its listings amid growing issues related to whale-driven market manipulation.
On Wednesday, Hyperliquid faced another whale manipulation attack—its second in two weeks—when a user shorted JELLYJELLY, a Solana memecoin, forcing the protocol to take on substantial losses.
While a whale dumped JELLYJELLY on decentralized exchanges, wallet “0xde96“ placed a short bet on the token, leading to a steep price drop that caused Hyperliquid’s HLP vault to take over the short position.
Following this, wallet “0x20e8,” which had just been created, entered a long trade on the token.
Lookonchain’s analysis revealed that the move significantly increased HLP’s unrealized losses, which reached roughly $12 million.
As Hyperliquid rushed to mitigate the issue, certain social media users speculated that competing centralized exchanges might list JELLYJELLY futures to encourage trading and destabilize Hyperliquid.
Some users suggested that if the token’s price hit a critical mark, the HLP vault could face complete liquidation.
Within approximately an hour, Binance and OKX launched JELLYJELLY perpetual futures.
At that exact time, Hyperliquid discontinued JELLYJELLY trading and restricted access to the contract.
“After evidence of suspicious market activity, the validator set convened and voted to delist JELLY perps,” the protocol announced.
“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 onchain data,” said the team, adding that “HLP’s 24-hour pnl as of writing is approximately 700k USDC. Technical improvements will be made, and the network will grow stronger as a result of lessons learned. More details will be shared shortly.”
The Block’s HYPE price data showed that Hyperliquid’s token dropped sharply by 22% at the height of the incident but later regained some ground, reducing its loss to around 10%.
Venmo co-founder Iqram Magdon-Ismail launched JELLYJELLY, a memecoin, in collaboration with Sam Lessin, an early investor in Venmo.
“As a self diagnosed chaotic neutral whose hero is Jack Sparrow … I highly approve of this insane crypto war playing out between degens, whales, and crypto trading platforms using JMJ even if I have nothing to do with it and only half understand it!” posted Lessin on X.
Earlier in March, Hyperliquid experienced another whale manipulation attack when a whale created a $306 million ether long position on March 12, leading to a $1.86 million profit after withdrawing 17 million USDC.
At the time, speculation pointed to an exploit, but Hyperliquid’s team insisted that the problem arose because its trading engine wasn’t designed to handle such a large position.
Just two weeks back, Hyperliquid faced a significant financial hit, losing $4 million. This came after a trader’s $200 million Ether position was liquidated.
The investor, identified by wallet ‘0xf3f4’, had taken a hefty gamble by leveraging 50 times on an ETH long position. They used $4.3 million in USDC as collateral, leading to a massive exposure of 113,000 ETH. Ultimately, the platform had to liquidate this position.
By withdrawing funds and lowering the margin beneath the maintenance threshold, the trader walked away with a $1.8 million gain. Meanwhile, Hyperliquid’s HLP vault bore the brunt of a $4 million loss.
