Hyperliquid’s management of the JELLY token situation has faced significant backlash from Gracy Chen, CEO of Bitget.
Following the removal of JELLY by Hyperliquid (HYPE), which resulted in an estimated loss of $10.6 million and a potential liquidation threat to its treasury, Chen criticized the decentralized exchange’s actions as “immature, unethical, and unprofessional.”
While Hyperliquid promised to reimburse affected users after delisting the token, Chen contended that the manner in which the losses were addressed raises doubts about the exchange’s integrity. She notably condemned the DEX for operating “like an offshore centralized exchange without proper know-your-customer or anti-money-laundering measures.”
In a post on X, Chen emphasized:
“Despite marketing itself as a cutting-edge decentralized exchange with an ambitious vision, Hyperliquid behaves more like an offshore CEX that lacks KYC/AML protocols, facilitating illicit activities and bad actors.”
Chen expressed concerns that Hyperliquid’s conduct could be indicative of an “FTX 2.0,” alluding to the infamous collapse of the FTX exchange in 2022 that left countless users affected.
Arthus Hayes, the founder and former CEO of derivatives exchange BitMEX, echoed similar sentiments on X.
The halting of the jellyjelly market came after a $5 million short bet by a trader faced liquidation, plunging the platform into controversy amid what appeared to be a coordinated pump scheme.
The dramatic surge in JELLY’s price, an astonishing 230% within an hour, resulted in a $10.6 million loss for the Hyperliquid liquidity pool. If the price had spiked further, it could have escalated losses to over $240 million. Hyperliquid’s validators opted to delist the token prior to this escalation, citing “suspicious market activity.”
Chen remarked:
“The choice to close the $JELLY market and enforce settlements at a favorable price creates a troubling precedent. Trust—not capital—is the foundation of any exchange (CEX or DEX), and when it is lost, regaining it is nearly impossible.”
Beyond her critique of the delisting, Chen highlighted what she labeled as “alarming flaws” in the DEX’s architecture. These include systemic risks to users arising from mixed vaults and unrestricted position sizes, which she stated have left it vulnerable to manipulation.
“Unless these issues are rectified,” she warned, “more altcoins could be weaponized against Hyperliquid—posing a risk of it becoming the next catastrophic failure in the crypto space.”
Earlier this month, blockchain investigator ZachXBT revealed that a Hyperliquid whale who engaged in substantial high-leverage short bets on the DEX was, in fact, a cybercriminal operating with stolen funds.
In the aftermath of the incident, the HYPE token experienced a significant decline.