Bitget CEO Gracy Chen Criticizes Hyperliquid JELLY Exploit: “Trust Is Lost” — Exploiter Couldn’t Escape a $1M Hit!

Gracy Chen, the CEO of Bitget, has voiced her dissatisfaction with Hyperliquid’s handling of the March 26 exploit accident. Following this incident, Hyperliquid announced the removal of JELLY’s futures contracts from its perpetual exchange. The exchange also mentioned that this comes after suspicious market activity in this market was recorded. Based on the statement, all the JELLY futures users have been reimbursed. These actions were approved by the small community of Hyperliquid validators, which showed contrast to the network’s supposed decentralisation.

Gracy Chen Warns: Hyperliquid Sets a Dangerous Precedent

Bitget Gracy Chen reacted to this and stated, “Despite presenting itself as an innovative decentralised exchange with a bold vision, Hyperliquid operates more like an offshore [centralised exchange].”. She also added, “Hyperliquid may be on track to become FTX 2.0.” Based on Chen’s response, she does not accuse Hyperliquid of a specific crime but believes its actions damage the crypto space. She stated, “The decision to close the $JELLY market and force settlement of positions at a favorable price sets a dangerous precedent.”. “Trust, not capital, is the foundation of any exchange […] and once lost, it’s almost impossible to recover.”

Venmo co-founder Iqram Magdon Ismail started the JELLY token as part of a bigger social media project. This token garnered significant attention and reached multi-million market capitalisation after it launched. This Coin’s value was around $25 million on March 26 as its future contracts went into effect. However, on the same day, a trader started a $6M short, self-liquidated, and increased the value of Jelly-My-Jelly. A

Inside the Hyperliquid JELLY Exploit

Based on the reports that Arkham Intelligence published on X, this trader also tried to manipulate Hyperliquid’s liquidation system. The trader’s Hyperliquid JELLY exploit included withdrawing his collateral before the system noticed the irregularity. According to the report, he opened three positions in three different accounts, each with a five-minute interval. Two of these accounts were long positions with $2.15 million and $1.9 million, and one was a short. The short position was the biggest at $4.1M as it was meant to tip the scale against the long positions. 

Hyperliquid just got exploited. What happened?

A trader deposited $7.167M on 3 separate Hyperliquid accounts within 5 minutes of each other. He then made leveraged trades on an illiquid coin, JELLYJELLY.

However, he ended up losing money, and is down almost $1M unless… pic.twitter.com/uNyMwLS5Sc

— Arkham (@arkham) March 26, 2025

This setup enabled “build up leverage in an attempt to drain funds from Hyperliquid,” according to Arkham. The trader exploited the Hyperliquidity Provider Vault (HLP) by setting up the $4 million short position. This is because the short position was too large to be liquidated immediately, so it passed the system. Arkham also mentioned that this trader withdrew his collateral from the other two accounts, which were longs. This Hyperliquid JELLY exploit was stopped when all the accounts were locked to reduce-only orders. As such, the trader sold the token from the first account to limit his losses.

$1M Frozen After Hyperliquid Exploiter Leaves with Losses

When the Jelly-My-Jelly’s market was frozen and closed on the Hyperliquid, its value was around 0.0095. This is the same value as when the exploiter opened his short position, turning his profit to 0. Based on Arkham’s report, this trader was only able to withdraw $6.26 million of his funds. Which means as of now, $1 million still remains frozen, with an additional $4,000 loss on the fees.  

Multiple Exploits, Mounting Concerns

This has not been the first time this platform has grappled with exploiters, as recently, a similar incident happened. On March 12, $200 million in long Ether future contracts were liquidated by two whales. The incident caused roughly $4 million in damages for Hyperliquid; as such, the platform has increased the collateral requirement. However, as Bitget Gracy Chen stated, some community members are worried that this platform might trigger another FTX incident.