Hyperliquid’s Validators Delist JELLY Perps After $12M Hack, Community Reacts

Hyperliquidity Provider (HLP), a leading decentralized liquidity protocol, has suffered a $12 million loss. This was due to a suspicious move by a whale who manipulated the price of $JELLY, the native crypto token of the Jelly Perps decentralized finance (DeFi) protocol.

Following the manipulation, the affected token artificially surged by over 230%, reaching $0.16 in an hour, before a massive downtrend ensued.

$JELLY Manipulation Unfolds

As revealed by onchain security firm, Lookonchain, the whale started his mission with about 124.6 million $JELLY. He sold his holdings, dumping the token massively and leaving HLP with about 389 million $JELLY losses, valued at $15.3 million. The system also liquidated about $4.5 million in short positions.

Thereafter, using a newly created account, the whale bought large units of $JELLY, driving the value of the token up to its all-time high. By the end of the transactions, HLP was sitting in about $12 million in losses.

Hyperliquid Takes Action

Following the incident, the HLP validator set has voted to delist JELLY perps from its protocol. Additionally, it has assured users that funds are safe and revealed plans to dig into onchain data and refund affected addresses within the next few days, exempting addresses related to the whale. 

Additionally, Hyperliquid settled affected short positions at the original $0.0095 opening price to minimize the incident’s damages.

Decentralization Questions Arise

However, the instant Hyperliquid validators convention to delist JELLY has caused the crypto community to question its claims of being a decentralized platform.

Grace Chen, CEO of Bitget, commented, “Hyperliquid may be on track to become FTX 2.0.” She noted that the protocol’s handling of the incident was immature and pictured the exchange as a centralized crypto trading platform operating without the required anti-money laundering regulations and Know Your Customer (KYC) verification process.

Meanwhile, the Hyperliquid community is on fire as users air their views on the incident, noting that the protocol’s approach has destroyed the trust it has built over the past few years.