An Entire Timeline of the Hyperliquid – JELLY Controversy

Key Points

• Yesterday, Hyperliquid’s validators decided to delist JELLY perps following market manipulation.
• The decision to close the JELLY market triggered a huge controversy in the industry.

Hyperliquid is in the spotlight after delisting the memecoin JELLY yesterday, following significant market manipulation.

The blockchain platform faced losses for its HLP vault, and the whole event could have turned the platform into a new FTX.

JELLY Market Manipulation

Yesterday, Lookonchain spotted a huge crypto whale with more than 124 million JELLY coins worth almost $4.9 million manipulating the digital asset’s price, and triggering potential huge losses for Hyperliquid’s HLP vault.

On-chain data shows that the whale first dumped JELLY and crashed its price, leaving HLP with a passive short position of 398 million JELLY coins worth over $15 million at the time of Lookonchain’s post.

Then, the whale bought JELLY back, which drove its price up and triggered a loss of $12 million for the vault.

On March 26, JELLY experienced notable price fluctuations, surging from a market cap of $9.5 million to almost $47 million, in a 386% spike.

Then its market cap dropped to $25 million only to climb again above $42 million, before dropping and settling to current levels of around $20 million.

Still, JELLY is up by over 48% today, despite yesterday’s intense volatilty.

JELLY price in USD today

Yesterday afternoon, following the events, Hyperliquid released an official statement via X, saying that they delisted JELLY perps.

Binance announced the listing of JELLY futures, and OKX also launched futures for the digital asset.

Historical data showed that JELLY short order taken over by Hyperliquid’s HLP vaut was settled at $0.0095 at 23:15 (UTC+8), earlier than Binance’s announcement when the price was $0.045.

HLP vault made a profit of over $700,000 at the settlement price when they took over the short order.

Hyperliquid’s JELLY-Related statement

In the X post, the team said that after evidence of suspicious market activity, the validator set voted to delist JELLY.

They noted the following essential moves:

• All users apart from flagged addresses, will be made whole from the Hyper Foundation.
• The moves will be made automatically in the coming days accordingly to on-chain data.
• Users don’t have to open a ticket, and the methodology will be shared later.
• Technical improvements will be made, and the network will grow.

The team said that, as with other chains, validators often need to convene to take decisive action as a group to ensure the integrity of the network, and that robustness and transparency are essential to the voting system.

On March 26, HLP’s 24-hour PNL was about 700,000 USDC at the time of the X post.

After evidence of suspicious market activity, the validator set convened and voted to delist JELLY perps.

All users apart from flagged addresses will be made whole from the Hyper Foundation. This will be done automatically in the coming days based on onchain data. There is no…

— Hyperliquid (@HyperliquidX) March 26, 2025

Hyperliquid Outflows Surge

According to Parsec data, within a few hours of the JELLY liquidation, Hyperliquid’s net outflow was $140 million. Today, the outflow is around $350 million.

Parsec data – Hyperliquid’s flows

The same data shows that in the past month, Hyperliquid recorded outflows of over $2.9 billion.

Parsec data – Hyperliquid outflows in March

The actions taken by Hyperliquid triggered strong reactions in the industry.

Hyperliquid on Track to Become the Next FTX?

Bitget CEO, Gracy Chen, commented on the matter in a post on X on March 26, saying that Hyperliquid may be on track to become the next FTX.

She said that the way the project handled the JELLY incident was immature, unethical, and unprofessional. She said that the event triggered user losses and cast serious doubts over the project’s integrity.

Chen said that despite presenting itself as an innovative decentralized exchange with a bold vision, Hyperliquid operates more like an offshore CEX with no KYC/AML, which enables illicit flows and bad actors on the platform.

She also stated that the decision to close the JELLY market and force the settlement of positions at a favorable price set a dangerous precedent.

Chen said that trust should be the foundation of any exchange, whether it’s a CEX or DEX, and not capital, and once trust is lost, there’s no way to recover it.

According to her, the platform’s product design reveals alarming flaws:

• Mixed vaults that expose users to systemic risks
• Unrestricted position sizes that open the door to manipulation

Unless the issues are resolved, more altcoins will be weaponized against Hyperliquid and will put it at risk of becoming a FTX 2.0.

When a user attacked Chen for commenting about the matter from a CEX CEO’s point of view, someone else highlighted that Bitget is ahead of Hyperliquid and has taken important steps to ensure transparency, such as publishing PoR reports regularly.

It’s also interesting to mention that Hyperliquid’s founder, Jeff, once accused Bitget of becoming the new FTX in 2023.

1/ Huge respect for Dragonfly continuing to invest in the bear market.

But I’m morally obliged to call out sketchy projects gaining momentum.

As a community we must preempt large scale implosions like #FTX or #LUNA that set the industry back years

Bitget may be the next FTX 🧵 https://t.co/R6JkTstXpV

— jeff.hl (@chameleon_jeff) April 5, 2023

Since 2023, Bitget has evolved significantly, and the Bitget Wallet now has over 60 million users, mirroring increased trust.

On-chain investigator, ZachXBT, also addressed the recent Hyperliquid events, mentioning an earlier event involving the Radiant hack with DPRK funds.

Hyperliquid Accused of Double Standard

In a post on X, he said that he has little interest in helping the platform following its approach in the JELLY case.

He brought up the Radiant hack with DPRK funds, which involved thousands of victims, and when Hyperliquid said that they could not do anything even if they were notified in a timely manner.

ZachXBT said that when a low-cap PVP memecoin is involved, Hyperliquid’s validators quickly rush to close positions at an arbitrary price.

He said that actual decentralization is rare in the industry and advised the project to:

• Stay consistent and do something when it’s possible for major incidents
• Be decentralized and do nothing
• Create a mechanism that discourages bad actors from using the protocol

Hyperliquid Risks Becoming FTX 2.0 Despite Trying to Prevent It

Hyperliquid risks being remembered as the FTX 2.0. because:

• TVL is falling
• Users are withdrawing assets, fearing protocol bankruptcy
• The situation resembles the FTX collapse of the GameStop attack

Hyperliquid’s more than $200 million user funds were at risk , and this would have easily led to an FTX 2.0. By delisting JELLY, the platform flipped to a $700,000 gain, but it will refund on-chain victims.

If Hyperliquid hadn’t solved the problem, it would have gone bankrupt, however, there are still risks for the project to end up like FTX, despite trying to prevent it.