Hyperliquid DEX Exploited for $12M of JELLYJELLY Tokens

Hyperliquid, a decentralized exchange, recently fell victim to a major exploit involving the Jelly My Jelly token (JELLYJELLY). The price manipulation led to over $12M in losses and a $5M short exposure.

Hyperliquid, a decentralized exchange, recently fell victim to a major exploit. The exploit involved the Jelly My Jelly token (JELLYJELLY), which was used by a trader to manipulate prices and generate huge losses for the exchange.

The exploit occurred over a period of 12 hours on January 30, beginning at 3:00 AM UTC. A trader deposited a total of $7.16 million in three Hyperliquid accounts to carry out the exploit. The trader then used two of the accounts to execute leveraged trades on the Jelly-My-Jelly token (JELLY).

At the start of the exploit, the trader’s main account held 999.3 ETH, while the other two accounts had no ETH or USD. The trader then used one of the subsidiary accounts to buy 126 million JELLY at $0.07, pushing prices down and exposing Hyperliquid’s liquidity vault to a $15.3 million short position. Afterward, the trader sold 30 million JELLY at $0.04, realizing a $1.2 million profit.

Next, the trader used their main account to buy 30 million JELLY at $0.03, inflating its price. In the span of an hour, the trader managed to increase the token price by over 500%, leaving HLP with unrealized losses of $12.3 million. Finally, the trader sold 30 million JELLY at $0.09 to exit their position completely.

By the time the exploit came to an end, Hyperliquid had lost over $12 million due to the trader’s actions, while the trader himself had closed all positions with a net profit of $1.2 million. Additionally, the trader’s main account had gained 499 ETH, leaving only 0.3 ETH in their subsidiary accounts.

The exploit on Hyperliquid highlights the challenges faced by decentralized exchanges in managing liquidity and mitigating risk, especially when dealing with new and volatile tokens.