Market Manipulation Incident Involving JELLY Token

Following a 400%+ price surge of the JELLY token due to market manipulation on Hyperliquid, exchanges Binance and OKX capitalized by listing JELLY futures, while Hyperliquid delisted the token’s perpetuals amid backlash over centralization concerns.

Incident Details

After the manipulation incident on Hyperliquid (HYPE), which affected the Jelly Jelly (JELLY) token, the derivatives exchange decided to delist JELLY and reimburse impacted users. Shortly after, Binance and OKX listed JELLY futures, likely aiming to profit from the token’s extreme price volatility. On March 26, the price of JELLY soared from approximately $0.0095 to $0.050, marking about a 426% increase.

High volatility drives trading volume, suggesting significant profit potential for exchanges via trading fees on JELLY perpetuals. However, speculations arise that the motives behind Binance and OKX’s listings extend beyond profit, with some users asserting it was an attempt to undermine Hyperliquid, drawing parallels to Binance’s alleged role in FTX’s collapse.

Blockchain investigator ZachXBT noted that accounts linked to the manipulation were funded through Binance.

Meanwhile, CoinGecko reported JELLY’s price has retraced to $0.020.

The Manipulation Breakdown

According to Arkham Intelligence, the manipulative trader created three accounts holding positions totaling $7.17 million—two long positions worth $2.15 million and $1.9 million, and a short position of $4.1 million. After depositing the funds within five minutes, the trader made leveraged trades on the illiquid JELLY token. Rapid buying on decentralized exchanges led to a quick price increase, leveling the trader’s short position for liquidation.

As the price surged over 400%, liquidation became difficult, triggering a transfer to Hyperliquid’s vault. The trader withdrew $6.26 million before Hyperliquid restricted their accounts and froze the ability to withdraw funds. This forced the trader to sell JELLY to recover some money, but not enough to salvage their initial investment. Hyperliquid’s decision to close the market at $0.0095 eliminated all floating profits, prompting community outrage regarding the centralization of the platform.

Hyperliquid’s validators collectively decided to delist the perpetuals, which sparked further criticism from the crypto community. Arthur Hayer expressed that Hyperliquid’s actions demonstrated its inability to handle JELLY effectively, while Bitget’s CEO Gracy Chen labeled the situation a dangerous precedent, highlighting the loss of trust in exchanges.