Hyperliquid May Be On Track to Become FTX 2.0 After Controversial Handling of the JELLY Token Incident

Bitget’s CEO, Gracy Chen, warned today about potential risks at crypto trading platform Hyperliquid following controversial handling of the JELLY token incident.

Bitget CEO Gracy Chen has issued a stark warning about the potential risks at crypto trading platform Hyperliquid following the controversial handling of the JELLY token incident.

Taking to X on Sunday, Chen penned a thread to share her "thoughts" on the unfolding saga, which saw the platform hit with a massive loss after a trader liquidated a large position.

The Bitget CEO began by saying that Hyperliquid "may be on track to become FTX 2.0" following a series of missteps.

"The way it handled the $JELLY incident was immature, unethical, and unprofessional, triggering user losses and casting serious doubts over its integrity," Chen wrote.

The platform faced turmoil after a trader opened and deliberately self-liquid liquidated a $6 million short position on JellyJelly (JELLY), a new token that launched on March 22. The move forced Hyperliquid to absorb substantial losses.

The token’s market cap surged from approximately $10 million to over $50 million in under an hour due to the forced squeeze.

The incident unfolded as the token price plummeted to nearly zero following the liquidation, and the system began liquidating other traders to recover the funds.

However, the rapid liquidation cascade led to a chain reaction, ultimately resulting in Hyperliquid bearing a significant portion of the loss.

The CEO went on to criticize Hyperliquid’s operational structure, stating:

“Despite presenting itself as an innovative decentralized exchange with a bold vision, Hyperliquid operates more like an offshore CEX with no KYC/AML, enabling illicit flows and bad actors.”

Chen highlighted structural concerns about Hyperliquid’s platform, including “mixed vaults that expose users to systemic risk, and unrestricted position sizes that open the door to manipulation.”

The Bitget CEO concluded her thoughts by saying that while the incident was "unfortunate," it could have been avoided with better risk management practices and a deeper understanding of the potential consequences of their actions.

Earlier this week, Binance announced plans to list JELLY perpetual futures amid the controversy, which some users interpreted as a move to target Hyperliquid’s position.