Bitget CEO Gracy Chen has commented on the backlash against Hyperliquid, a decentralized exchange that experienced a recent exploit.
The incident has raised significant concerns about the platform’s transparency, risk management, and operational integrity, bringing to mind previous industry failures.
#Hyperliquid may be on track to become #FTX 2.0.
The way it handled the $JELLY incident was immature, unethical, and unprofessional, triggering user losses and casting serious doubts over its integrity. Despite presenting itself as an innovative decentralized exchange with a…
— Gracy Chen @Bitget (@GracyBitget) March 26, 2025
Arkham Intelligence said the exploit unfolded when a trader deposited $7.167 million into three separate Hyperliquid accounts within five minutes. Using this capital, he leveraged his positions to trade an illiquid token, JELLYJELLY, in an apparent attempt to manipulate the market. Two of his accounts took long positions—one with $2.15 million and another with $1.9 million—while a third account placed a $4.1 million short position to counterbalance the trades. Despite this strategy, the trader ultimately lost nearly $1 million unless Hyperliquid permitted him to withdraw his funds, adding another layer of controversy.
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
Chen argues that despite Hyperliquid’s branding as a next-generation decentralized exchange, its lack of KYC and AML safeguards leaves it vulnerable to illicit financial activity. The $JELLY incident has only intensified scrutiny, with users accusing the platform of market manipulation and unfair treatment. This has led to growing doubts about the platform’s commitment to decentralization and user protection.
Beyond this immediate controversy, deeper concerns about Hyperliquid’s product design have emerged. Chen pointed out structural flaws such as its mixed vault system, which exposes users to systemic risk, and its unrestricted position sizes, which could be exploited for further market manipulation. Analysts warn that unless these fundamental issues are addressed, Hyperliquid could face even greater crises, potentially positioning itself as the subsequent major failure in the crypto industry.
Adding to the conversation, Bybit CEO Ben Zhou weighed in on the challenges of managing high-leverage trading across decentralized and centralized exchanges. He highlighted the risks of excessive leverage in light of a significant Ethereum liquidation on Hyperliquid. Zhou’s comments contribute to the ongoing debate about how exchanges should address extreme market volatility and the potential for market manipulation.
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