Decentralized exchange Hyperliquid removed the JELLY token after a massive price manipulation scandal. Meme coin JELLY’s price skyrocketed 500% after suspicious trading that might have cost the exchange as much as $12 million. To avoid this debacle, the Hyperliquid team acted to convert a potential loss into a gain of $700,000 before ending JELLY trading completely.
Background on JELLY Token Manipulation
On 26th March 2025, a holder of JELLY tokens of around 124.6 million valued at $4.5 million initiated a short position of $8 million on Hyperliquid. This move exposed the platform’s liquidity vault to significant risk. The trader would then initiate a massive long position at the same time, which pushed JELLY’s price to astronomical levels and caused widespread liquidations.
This was subsequently recognized as deliberate market manipulation to take advantage of the volatility of JELLY. The trader reportedly moved $7.167 million across three accounts in five minutes and opened leveraged positions on the illiquid token.
How Hyperliquid Responded
As JELLY’s price continued to increase, the threat to Hyperliquid’s liquidity vault was very high. If the token’s market capitalization continued to increase, the company might have lost huge sums of money. In a spectacular turn of events, Hyperliquid validators voted to bring the price of JELLY back to $0.0095—the price of the first short position. By doing so, Hyperliquid was able to close 392 million JELLY tokens, eventually turning a potential disaster into a comfortable gain of $703,000.
In order to avoid any future manipulations, Hyperliquid closed all currently open JELLY positions and delisted the token from their platform. The platform will refund affected users automatically, excluding wallets flagged for suspicious activity tied to the manipulation.
Impact on Hyperliquid’s Reputation and Market
The crypto community responded with mixed views. Some praised Hyperliquid’s quick action, while others criticized its centralized decision-making. Bitget CEO Gracy Chen publicly condemned the move, accusing the exchange of sacrificing market integrity to protect its vault.
This is not the first Hyperliquid liquidity shock; only last fortnight saw a big $200 million Ethereum long liquidation lose $4 million on the platform. The total of the two put native Hyperliquid token HYPE down over 9% in 24 hours, with a total decline of over 22% for the month.
