Jelly Token Meltdown: A $6M Exploit Rocks Hyperliquid's Reputation

The Rise and Fall of JELLY Token Launched by Venmo co-founder Iqram Magdon-Ismail, the JELLY token was initially part of the JellyJelly Web3 social media project, debuting on January 30. The token's price soared to $0.21, but within just ten days, it plummeted to a mere $0.01, a staggering loss that left many investors in shock. The market cap, which had once hovered near $250 million, dwindled to approximately $25 million by March 26, underscoring the volatility synonymous with meme coins and the speculative nature of the DeFi market.

The Exploit Unfolds: A Short Squeeze On March 26, the exploit occurred during a short squeeze that transpired within a matter of hours. According to a detailed analysis by Arkham Intelligence, a whale orchestrated a complex strategy involving multiple accounts on Hyperliquid, depositing $7 million and executing leveraged trades on the illiquid JELLY token. As the price surged, the exploiter's short position was liquidated, enabling them to withdraw a significant profit. The price of JELLY spiked by an astonishing 400%, leading to an inevitable crash when Hyperliquid intervened to restrict further withdrawals.

Hyperliquid's Response: Controversy and Criticism Hyperliquid's decision to shut down the JELLY market has been met with widespread criticism. The exchange cited "evidence of suspicious market activity" as justification for delisting the token, but many observers have likened their handling of the situation to the notorious FTX collapse. Gracy Chen, CEO of Bitget, expressed her disapproval, describing Hyperliquid's actions as "immature, unethical, and unprofessional." The decision to close the market and settle positions at a favorable price has raised serious concerns about the integrity of the exchange and its commitment to user protection.