Jelly-my-Jelly (JELLY) memecoin exploit leads Hyperliquid to delist the token

Suspicious trading activity led decentralized exchange Hyperliquid to delist the Jelly-my-Jelly (JELLY) memecoin, with details of an exploit unraveling

Decentralized exchange Hyperliquid has delisted the Jelly-my-Jelly (JELLY) memecoin following suspicious trading activity, leading to details of an exploit emerging over the course of a few days.

The decentralized finance sector has already seen historic exploits in 2025, as the space struggles with issues of oversight and crypto liquidity. The Bybit hack saw North Korean hackers get away with $1.4 billion in February alone.

The JELLY incident, in which a whale exploited the Hyperliquid exchange’s liquidation parameters, getting away with millions, is just the latest exploit to rock the industry.

However, some critics have been quick to note that the exploiter will likely still be out of pocket, while several market observers were more critical of Hyperliquid’s reaction to the short squeeze, with one comparing it to the ill-fated FTX. Here’s a look at how the incident unfolded.

Venmo co-founder Iqram Magdon-Ismail launched the JELLY token as part of the JellyJelly Web3 social media project. Following the launch on Jan. 30, the token price crashed from $0.21 to just $0.01 some 10 days later.

Jelly-my-Jelly token price lost most of its value in the first two weeks of trading. Source: CoinMarketCap

While the coin’s market cap initially boasted almost a quarter of a billion dollars, by March 26 it had a market cap of roughly $25 million.

Short squeeze of JellyJelly token

The short squeeze on the JellyJelly token took place over the course of just a few hours on March 26. According to a postmortem by Arkham Intelligence, this is how it went down:

The exploiter deposited $7 million on three separate Hyperliquid accounts, making leveraged trades on the illiquid Jelly token.

Two accounts took $2.15 million and $1.9 million long positions on JELLY, while the other took a $4.1 million short position to cancel the others out.

As the price of JELLYJELLY increased, the short position was liquidated, but it was too large to be liquidated normally.

The short position was passed to the Hyperliquidity Provider Vault (HLP).

The exploiter meanwhile had a seven-figure PnL from which to withdraw. By this point, the price of JELLY had pumped 400%.

The exploiter began to pull withdrawals but Hyperliquid soon restricted their accounts. Instead of attempting further withdrawals, they began to sell their JELLY position.

Hyperliquid shuts down Jelly market

As the trader began to sell their remaining Jelly position, Hyperliquid shut down the market for the token. According to Arkham, the exchange closed the market with Jelly at $0.0095, the price at which the third account had entered its short trades.

Hyperliquid announced on X that it would delist perpetual futures trading for the JELLY token, citing “evidence of suspicious market activity.”

Related: Long and short positions in crypto, explained

The exchange said, “All users apart from flagged addresses will be made whole from the Hyper Foundation. This will be done automatically in the coming days based on onchain data.”

It further acknowledged the hit the HLP took when saddled with the long positions but said that the HLP’s positive net income was $700,000 over the last 24 hours: “Technical improvements will be made, and the network will grow stronger as a result of lessons learned.”

Crypto traders react to exploit

Some crypto market observers weren’t very impressed with how Hyperliquid handled the situation. The CEO of Bitget, Gracy Chen, wrote that the way it handled the $JELLY incident was immature, unethical, and unprofessional, triggering user losses and putting a question mark on its integrity.

She added that the exchange may be on track to becoming FTX 2.0 and that the decision to close the Jelly market and settle positions at a favorable price with the stipended being paid by the Hyper Foundation is setting a dangerous precedent.

Another market insider, Alvin Kan, chief operating officer at Bitget Wallet, told Cointelegraph that the Jelly meltdown was just another example of how capricious hype-based price action can be in a bull market.

“The JELLY incident is a clear reminder that hype without fundamentals doesn’t last for long in a bear market. We'll see more cases like this. In essence, we’re seeing the good aspects of DeFi being highlighted. But on the flip side, some of the bad practices and imperfections within the crypto industry are also coming to light,” he said.

Kan added that in the DeFi sector, momentum can drive short-term attention, but it doesn’t necessarily build sustainable platforms.

“The market will continue to expose projects that are built on speculation, not utility, and those that