JELLY Scheme Backfires, Hyperliquid Trader May Lose $1 Million

The situation involves Jelly my Jelly (JELLY), a meme coin that was frozen and removed from the platform following the incident.

In a March 26 post on X, Arkham reported that the trader tried to take advantage of the system by opening three separate accounts within minutes. Two of them placed large buy positions worth $2.15 million and $1.9 million, while the third opened a $4.1 million sell position.

Did you know?

Want to get smarter & wealthier with crypto?

Subscribe - We publish new crypto explainer videos every week!

What is Ripple? Beginner-Friendly XRP Explainer (Animated)

SUBSCRIBE

ON YOUTUBE

JELLY's price suddenly increased by over 400%, which triggered liquidation of the large short position. However, the system could not handle it immediately due to its size. The position was passed to the Hyperliquidity Provider Vault (HLP), which is responsible for managing large liquidations.

At the same time, the trader withdrew collateral from the other two accounts. Arkham noted that the trader had a "7-figure positive PnL to withdraw from" at that moment.

However, Hyperliquid later restricted the accounts to reduce-only mode. This means the trader could no longer open new positions and had to sell off holdings in one of the accounts to try to recover some of the funds.

Arkham says the trader has withdrawn around $6.26 million in total. However, at least $1 million remains stuck in the accounts.

Bitget $1.74B CEO Gracy Chen raised concerns about how Hyperliquid handled this situation. What did she say? Read the full story.