- Gracy Chen slams Hyperliquid’s handling of JELLY, likening it to FTX’s collapse, sparking industry-wide concerns over its practices.
- A $6M short position on JELLY led to a volatile short squeeze, exposing flaws in Hyperliquid’s risk management and vault design.
- Hyperliquid’s forced settlement of JELLY trades triggered outrage, raising trust issues and regulatory concerns in the DeFi space.
Bitget CEO Gracy Chen has raised concerns over Hyperliquid’s handling of the JELLY token incident, comparing it to FTX’s downfall. She criticized the platform’s response as immature, unethical, and unprofessional. Her remarks highlight the growing skepticism surrounding Hyperliquid’s operations and its lack of regulatory oversight.
Hyperliquid’s JELLY Token Debacle
Following the listing of the JELLY token, Hyperliquid, a decentralized exchange (DEX), saw significant unrest. When a trader opened a $6 million short position against JELLY, a low-cap asset with a $10 million market cap, the situation became more heated. The trader then removed the margin, shifting the risk onto Hyperliquid’s HLP vault, which absorbs liquidated positions.
A massive short squeeze followed, sending JELLY’s market capitalization soaring from $10 million to over $50 million in under an hour. The rapid price surge placed Hyperliquid’s vault in jeopardy, with potential losses nearing $12 million. If JELLY had reached $0.15374, the platform’s entire $230 million vault could have been wiped out.
Forced Settlement Sparks Backlash
As the chaos unfolded, a new wallet, 0x20e8, took advantage of the situation. The wallet executed a well-timed long position, profiting $8.2 million. Meanwhile, major exchanges like Binance and OKX quickly introduced JELLY perpetual futures, fueling further market activity.
The unidentified trader moved $7.17 million across multiple Hyperliquid accounts, successfully withdrawing $6.26 million while leaving behind an inaccessible $900,000 balance. Facing mounting losses, Hyperliquid took drastic action. It force-delisted JELLY at $0.0095 per token, liquidating 392 million tokens worth $3.72 million. The exchange turned a $703,000 profit from the move, triggering outrage across the crypto community.
The Bigger Picture
Hyperliquid’s decision to force-settle positions at a favorable price raises serious concerns. It sets a precedent that undermines trust in decentralized finance (DeFi). Furthermore, its lack of KYC/AML measures exposes the platform to illicit activities. Critics argue that its vault design creates systemic risks, while unrestricted position sizes allow market manipulation.
The JELLY fiasco highlights deeper flaws in Hyperliquid’s risk management. Unless the platform addresses these vulnerabilities, it risks becoming the next catastrophic failure in crypto. Transparency, security, and trust remain essential for any exchange’s survival.
