A trader behind the recent “suspicious market activity” on Hyperliquid, which led to the freezing and delisting of Jelly my Jelly (JELLY) perpetual futures, is now potentially down almost $1 million, according to blockchain analytics firm Arkham Intelligence.
In a March 26 post on X, Arkham revealed that the trader attempted to manipulate the platform’s liquidation system for profit. The scheme involved opening three accounts within five minutes—two long positions totalling $4.05 million and a third short position worth $4.1 million—to create artificial leverage and exploit Hyperliquid’s system.
As the price of JELLY surged over 400%, the trader’s $4 million short position was liquidated. However, due to its size, the liquidation process transferred the position to the Hyperliquidity Provider Vault (HLP) rather than executing it immediately.
Simultaneously, the trader withdrew collateral from the other two accounts while having a seven-figure positive profit and loss (PnL) balance available for withdrawal.
The trader’s strategy failed when their accounts were restricted to reduce-only orders, leading them to sell assets to recover funds. The JELLY market was shut down by Hyperliquid at $0.0095, nullifying potential profits. The trader withdrew $6.26 million but has over $1 million still stuck in the accounts. If they can access the remaining funds, their exploit cost would be $4,000; otherwise, they risk nearly a $1 million loss.
Hyperliquid has since delisted JELLY perpetual futures, citing clear evidence of market manipulation. This incident follows other recent liquidity crises on the platform. Earlier in March, Hyperliquid raised margin requirements after its liquidity pool suffered millions in losses during a major Ethereum (ETH) liquidation. A whale trader intentionally unwound a $200 million ETH long position on March 12, causing HLP to incur a $4 million loss.
Bybit CEO Ben Zhou addressed the liquidation, shedding light on the challenges of managing high-leverage trading on decentralized exchanges (DEXs) and centralized exchanges (CEXs).
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