The trader behind the recent suspicious market activity on Hyperliquid - which led the platform to freeze and delist the memecoin Jelly my Jelly (JELLY) - may have suffered a loss of nearly 1 million USD from their actions.
According to blockchain analysis company Arkham Intelligence, in a post on X on March 26, the trader attempted to manipulate the system to profit from price fluctuations by withdrawing collateral before Hyperliquid's liquidation system could react.
Arkham noted in their analysis report that within just 5 minutes, the trader opened three accounts: two longing positions worth 2.15 million USD and 1.9 million USD respectively, along with a short position worth 4.1 million USD to neutralize the long positions.
"This action allowed the trader to leverage and withdraw funds from Hyperliquid," Arkham observed.
When JELLY's price increased by over 400%, the 4 million USD short position was liquidated. However, this short order was not immediately closed due to its large scale and was transferred to the Hyperliquidity Provider Vault (HLP) - responsible for liquidating the position.
Simultaneously, the trader withdrew collateral from the two remaining accounts while having an unrealized profit of six figures.
However, this "exploit" quickly encountered obstacles when accounts with unrealized gains/losses of millions of USD were limited to only reduce-only orders. This forced him to sell tokens from the first account on the market to recover part of the capital.
Hyperliquid subsequently closed the JELLY trading market at 0.0095 USD - matching the short order price, thereby "wiping out all floating gains/losses from the first two accounts."
In total, Arkham reported that the trader withdrew 6.26 million USD, but at least 1 million USD remains in the account.
"If he can withdraw this amount in the future, he would only lose around 4,000 USD. But if not, the loss could reach nearly 1 million USD," Arkham observed.
After the incident, Hyperliquid delisted the perpetual futures contract related to JELLY, citing evidence of suspicious market activity.
This is not the first time Hyperliquid has encountered a similar issue. On March 14, the platform increased margin requirements after the liquidity fund suffered millions of USD in losses during a large-scale Ethereum (ETH) liquidation.
Specifically, on March 12, a whale deliberately triggered the liquidation of an ETH long position worth around 200 million USD, causing HLP to suffer a 4 million USD loss when processing the transaction.
Additionally, some traders have begun "whale hunting" on this platform, targeting positions with large leverage in a "democratized" manner in an attempt to liquidate them.
Disclaimer: The article is for informational purposes only and is not investment advice. Investors should thoroughly research before making decisions. We are not responsible for your investment choices.
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