A significant cryptocurrency whale, responsible for manipulating the price of Jelly (JELLY) on the decentralized exchange Hyperliquid, still controls approximately 10% of the token’s total supply, which is valued at nearly $2 million. This comes despite the exchange freezing and delisting JELLY after uncovering suspicious trading activities. Blockchain investigator ZachXBT revealed that five addresses linked to the whale continue to hold considerable amounts of the token.
The whale’s actions reportedly generated at least $6.26 million in profits by exploiting Hyperliquid’s liquidation mechanism. The manipulation began when the trader opened three large positions within a mere five minutes: two long positions totaling $2.15 million and $1.9 million, and a $4.1 million short position. When JELLY’s price surged by 400%, the short position should have triggered liquidation. However, the size of the position prevented immediate sell-off, allowing the position to be absorbed by Hyperliquid’s Hyperliquidity Provider Vault (HLP)—a system designed to liquidate large positions in a controlled manner. This allowed the whale to avoid liquidation and profit from the token’s price surge.
Following the incident, Hyperliquid froze trading and delisted JELLY, citing “evidence of suspicious market activity.” The platform stated it would reimburse most affected users, though it explicitly excluded the trader responsible for the manipulation. Users who held long positions in JELLY at the time of settlement will receive refunds based on the token price of $0.037555. Hyperliquid acknowledged vulnerabilities in its liquidation system and pledged to implement improvements, including stricter caps on the Liquidator Vault, revisions to the open interest cap formula, and the introduction of an on-chain voting system to decide the delisting of assets falling below specific thresholds.
The JELLY scandal adds to a growing list of meme coin-related controversies. Just two weeks prior, a Wolf of Wall Street-themed meme coin, launched by Hayden Davis—co-creator of the MELANIA and LIBRA tokens—plummeted by over 99% after revelations that insiders controlled 80% of its supply. These scandals have heightened concerns about the stability of meme coins, which often experience rapid gains based on hype rather than solid use cases. Alvin Kan, chief operating officer at Bitget Wallet, expressed concerns, stating, “Hype without fundamentals doesn’t last,” while noting that speculative tokens are particularly vulnerable in fast-moving markets.
The incident has also ignited a broader debate about the balance between decentralization and intervention in decentralized finance. While Hyperliquid’s actions to freeze trading and delist JELLY helped shield users from further losses, the platform’s decision raised questions about the degree of centralized control within decentralized ecosystems. In response, Hyperliquid emphasized its commitment to improving its financial infrastructure, acknowledging its imperfections but pledging to evolve and enhance the platform with input from its community.
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