In a complex and dramatic scandal, HyperLiquid was rocked today by a massive short squeeze on JELLY, forcing them to take on the liability of a trader, leaving them with a $230 million liability.

As the situation developed, major exchanges like Binance and OKX listed JELLY perpetual contracts in what appeared to be a direct attack. HyperLiquid Delisting the Token , causing a major controversy.

What happened to JELLY JELLY and Hyperliquid?

HyperLiquid, a popular DEX , is facing major scrutiny after an interesting short squeeze. JELLY JELLY, a newly launched Solana meme coin , is at the center of the incident.

Essentially, large JELLY whales succeeded in manipulating the price of this meme coin, causing losses in HyperLiquid's HLP inventory.

“A large whale with 124.6 million JELLYJELLY ($4.85 million) is manipulating its price to cause Hyperliquidity Provider (HLP) to face a loss of $12 million. He first dumped the Token, causing the price to drop and leaving HLP with a passive short position worth $15.3 million. He then bought it back, pushing the price up—causing HLP to incur a loss of nearly $12 million,” LookonChain stated via social media.

So, basically, JELLY JELLY is up nearly 500% today. This dramatic jump was triggered by something called a “short squeeze.” This happens when someone makes a big bet that the price of a coin will fall (known as “shorting”), but instead, the price suddenly rises.

In this case, a trader borrowed a large amount of JELLY Token and immediately sold them. He expected the price to fall, bought the Token back at a cheaper price, and kept the difference as profit.

Unfortunately for the trader, the price did not drop but skyrocketed, forcing them to buy back the coin at a much higher price, creating a huge loss.

This sudden forced buying pushed the price even higher, attracting the attention of traders and investors who jumped in to take advantage of the opportunity. In less than an hour, JELLY's market Capital rapidly increased from $10 million to $43 million.

The frenzy also left HyperLiquid, the exchange involved, with a massive $6.5 million loss from the trader's failed short position, sparking speculation about potential financial pressure on the platform.

Meanwhile, Binance and OKX have listed JELLY perpetual contracts, pushing its price even higher. Thus, the potential loss becomes even greater for HyperLiquid. Some users even call on Binance and other competitors to list the Token and deal a 'fatal blow' to HyperLiquid.

Binance Looks Like It's Trying to Liquidate HyperLiquid

In an interesting development, it seems that these competitors are listening. Binance, the world's largest cryptocurrency exchange, has received a wave of requests to list JELLY JELLY, causing a huge loss for HyperLiquid.

Yi He, one of the co-founders, said she would XEM the listing, and crypto investigator ZachXBT claimed that the whale was initially funded through Binance.

Shortly after these developments, Binance announced that they would begin offering perpetual contracts for JELLY.

OKX also joined the trend with its own perpetual contract trading. HyperLiquid then announced that it would Delisting JELLY JELLY, seemingly erasing its unrealized losses.

“After evidence of suspicious market activity, the validation group met and voted to Delisting JELLY perps. All users except flagged addresses will be compensated by the Hyper Foundation. This will be done automatically in the coming days based on onchain data. No need to open a ticket. The method will be Chia in detail in a later announcement,” HyperLiquid’s statement said .

The drastic action immediately caused a stir on social media, with HyperLiquid supporters expressing concern over the JELLY JELLY incident, while opponents accused the company of illegal behavior.

Company insiders confirmed that the decision was made unanimously, somewhat dispelling rumors that the company's CEO acted alone.

However, there is no understatement here. If HyperLiquid could simply declare its JELLY JELLY debts void, that would be a seriously destabilizing act.

Commentators point out that this liquidation takeover mechanism was one of the main reasons for FTX's collapse .

The community will have to watch carefully to XEM how the situation develops, but this is very worrying.