Summary

HyperLiquid’s market maker vault faced significant losses due to alleged manipulation by a trader in the JELLY token, leading to a forced delisting and position closure.

What Happened:

• The automated market maker vault on HyperLiquid suffered a $13.5 million loss before all positions were closed.
• The HYPE token saw a 20% drop amid the trading turmoil.
• Binance’s decision to list JELLY resulted in a staggering 560% price increase.

Background

The Hyperliquidity Provider (HLP) suffered losses when a trader with a $4.85 million JELLY investment conducted a series of trades manipulating the market price. Following the price manipulation, HyperLiquid decided to delist the JELLY token completely.

In response to suspicious activity, the validator community convened and voted to remove JELLY from trading. HyperLiquid stated that all affected users, barring those flagged, would be compensated by the Hyper Foundation.

Corey Hoffstein from Newfound Research raised legal concerns about the actions taken by HyperLiquid. The incident echoes previous market manipulations observed in other platforms.