A Million-Dollar Jelly Mess: A Cautionary Tale of Blockchain Hilarity

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Well, well, well, if it isn’t the grandest fiasco since the Mississippi flood of 1897! The trader behind the “suspicious market activity” on Hyperliquid, a platform that’s as stable as a one-legged man in a kicking contest, is reportedly down a cool million from their shenanigans. 🤣

Arkham Intelligence, the blockchain sleuths who can trace a digital breadcrumb trail like a bloodhound on the hunt, reported on March 26 that this so-called “trader” attempted to manipulate the system to profit from price movements. Apparently, they thought they were clever enough to withdraw collateral before Hyperliquid’s liquidation system could catch up. 🕵️‍♂️

The trader, with all the finesse of a bull in a china shop, opened three accounts within a span of five minutes. Two accounts had $2.15 million and $1.9 million long positions, and the third, a $4.1 million short, was set to cancel out the longs. According to Arkham’s post-mortem report, this move was designed to build up leverage and, in their words, “drain funds from Hyperliquid.” 😱

When the price of Jelly (JELLY) spiked by over 400%, the $4 million short position entered liquidation. However, it didn’t liquidate immediately because it was too large and instead passed to the Hyperliquidity Provider Vault (HLP). Meanwhile, the trader got a head start and withdrew collateral from the other two accounts, pulling out while they still had a “7-figure positive PnL to withdraw from,” as Arkham put it.

But the “exploiter” hit a brick wall when Hyperliquid restricted the accounts to reduce-only orders, effectively forcing them to sell the tokens in the first account on the market to recoup some of their funds. It’s like trying to bail out a sinking ship with a colander. 🚤

Hyperliquid eventually closed the Jelly token market at a price of 0.0095, the same price as the trader’s short trade, which “zeroed out all floating PnL on the first two exploiter accounts.”

In total, Arkham says the trader withdrew $6.26 million, but at least $1 million is still in the accounts. “Assuming he can withdraw this at some point in the future, his actions on Hyperliquid have cost him a total of $4,000. If he is unable to, he faces a loss of almost $1 million,” the blockchain analytics firm said. 🤦‍♂️

Hyperliquid has since delisted perpetual futures tied to the JELLY token, citing evidence of suspicious market activity. It’s like closing the barn door after the horses have bolted, but hey, better late than never, right?

Other Traders Have Been Using Similar Tactics

This isn’t the first time Hyperliquid has had issues like this. On March 14, Hyperliquid increased margin requirements for traders after its liquidity pool lost millions of dollars during a massive Ether (ETH) liquidation. A whale trader intentionally liquidated a roughly $200 million Ether long position on March 12, causing HLP to lose $4 million while unwinding the trade. 🐳

Traders have also begun hunting whales on the platform, targeting prominent leveraged positions in a “democratized” attempt to liquidate them. It’s like the Wild West out there, folks, with everyone trying to outsmart each other in a high-stakes game of financial poker. 🃏

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2025-03-27 06:19