Hyperliquid, a prominent centralized exchange, is facing intense scrutiny after a controversial incident involving the JELLY token. Some industry leaders are drawing comparisons to the infamous collapse of FTX in 2022, citing mismanagement and lack of transparency as major concerns.
The controversy began when a trader manipulated the price of JELLY, shorting it before artificially inflating its value on-chain. This left Hyperliquid’s Hyperliquidity Provider (HLP) vault with an estimated $12 million loss. In response, the platform delisted JELLY and forcefully settled positions at $0.0095—far below the oracle price of $0.50. While this move mitigated potential losses of $230 million, it also sparked widespread criticism.
Gracy Chen, CEO of Bitget, condemned the action, calling it “immature, unethical, and unprofessional.” She warned that Hyperliquid’s response sets a dangerous precedent, eroding user trust and exposing the exchange’s vulnerabilities. Chen also pointed out fundamental flaws in Hyperliquid’s design, including mixed vault structures and unlimited position sizes, which make it susceptible to manipulation.
#Hyperliquid may be on track to become #FTX 2.0.
— Gracy Chen @Bitget (@GracyBitget) March 26, 2025
The way it handled the $JELLY incident was immature, unethical, and unprofessional, triggering user losses and casting serious doubts over its integrity. Despite presenting itself as an innovative decentralized exchange with a…
Ironically, in April 2023, Hyperliquid’s CEO, Jeff Yan, had accused Bitget of similar unethical practices, even suggesting that Bitget could be “the next FTX.” He criticized Bitget’s matching engine and alleged that the platform secretly operated outside its claimed order book model. Now, the tables have turned, with Hyperliquid itself facing allegations of reckless management.
1/ Huge respect for Dragonfly continuing to invest in the bear market.
— jeff.hl (@chameleon_jeff) April 5, 2023
But I'm morally obliged to call out sketchy projects gaining momentum.
As a community we must preempt large scale implosions like #FTX or #LUNA that set the industry back years
Bitget may be the next FTX 🧵 https://t.co/R6JkTstXpV
Adding to the concerns, on-chain investigator ZachXBT revealed that Hyperliquid failed to act when North Korean hackers used stolen funds on the platform, yet moved swiftly in the JELLY case. Former BitMEX CEO Arthur Hayes also weighed in, stating, “Let’s stop pretending Hyperliquid is decentralized.”
The fallout has impacted Hyperliquid’s native token, HYPE, which suffered double-digit losses. BeInCrypto data shows a 7.8% decline, with HYPE trading at $14.4. Meanwhile, DefiLama reports that HLP’s Total Value Locked (TVL) plummeted 32.3%, from $287.8 million to $194.8 million.
Also Read: Whale Trader Returns: High-Leverage Moves Rock Hyperliquid & GMX
With mounting concerns over its operations, Hyperliquid must address these transparency and security issues—or risk following FTX’s disastrous trajectory.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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