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{"actor":"system:backfill","investigation_id":"08752005-1f07-4792-bacf-583564b32b2c","kind":"publish","page_slug":"hyperliquid","published_at":"2026-05-28T18:59:23.618Z","sequence_num":1,"snapshot":{"content_type":"investigation","entity_name":"Hyperliquid","sections":[{"content":"Hyperliquid operates with <cite index=\"13-16,14-10,20-9\">only four validators securing billions of dollars in assets</cite>, creating significant centralization concerns. <cite index=\"11-9,11-10,11-11\">Security expert Taylor Monahan highlighted that this small validator pool creates a single point of failure, where if an executive's device were compromised, it could open the floodgates to dire consequences</cite>. <cite index=\"18-1,18-20\">A compromise involving three of the four validators could allow malicious actors to gain control over the network, approve unauthorized transactions, and drain liquidity pools</cite>. <cite index=\"14-3,14-4\">This centralized decision-making structure makes it easier for attackers to compromise network security</cite>, despite the platform's claims of decentralization.","heading":"Validator Centralization Risks","severity":"high","sources":[{"credibility":2,"name":"Hyperliquid Under Fire: Security Concerns - Brave New Coin","type":"news_article","url":"https://bravenewcoin.com/insights/hyperliquid-under-fire-security-concerns-amid-allegations-of-north-korean-exploitation"},{"credibility":2,"name":"Why Validators Fail: Lessons from the Hyperliquid Incident - CCN","type":"news_article","url":"https://www.ccn.com/education/crypto/why-validators-fail-lessons-for-defi-ecosystem/"}]},{"content":"In December 2024, Hyperliquid faced scrutiny after <cite index=\"11-7\">wallet addresses linked to North Korea's Lazarus Group conducted large transactions on the platform, moving Ethereum (ETH) around in a way that raised concerns</cite>. <cite index=\"13-4,13-5,13-6,13-7\">Security expert Taylor Monahan alleged that wallets associated with the DPRK were trading Ethereum on Hyperliquid, claiming these were not standard transactions but potential vulnerability tests, asserting 'DPRK doesn't trade. DPRK tests'</cite>. The allegations triggered <cite index=\"13-9\">over $256 million in fund withdrawals from the platform in just 30 hours, with December 23 alone witnessing net outflows exceeding $502 million</cite>. <cite index=\"13-12,13-13,13-14\">Hyperliquid Labs responded by denying any security breach, stating 'There has been no DPRK exploit—or any exploit for that matter—of Hyperliquid. All user funds are accounted for'</cite>.","heading":"North Korean Hacker Activity","severity":"high","sources":[{"credibility":2,"name":"Hyperliquid Under Fire - Brave New Coin","type":"news_article","url":"https://bravenewcoin.com/insights/hyperliquid-under-fire-security-concerns-amid-allegations-of-north-korean-exploitation"},{"credibility":2,"name":"Hyperliquid under scrutiny - Blockworks","type":"news_article","url":"https://blockworks.com/news/hyperliquid-security-fuels-decentralization-concerns"}]},{"content":"In March 2025, Hyperliquid faced a major market manipulation incident involving the JELLY token that exposed critical vulnerabilities. <cite index=\"21-7,21-8,21-9,21-10\">An attacker opened two long positions and a short position on the JellyJelly token worth $4.1 million, then pumped the token's price across multiple exchanges, causing its value to increase by over 400% within a single hour</cite>. <cite index=\"22-1,22-8\">This manipulation temporarily caused the Hyperliquidity Provider (HLP) vault's unrealized loss to reach $13.5 million</cite>. <cite index=\"21-12,21-13,21-14\">When losses reached $12 million, the protocol's validators rapidly took action to delist the JELLY token, settling all positions at $0.0095 rather than the $0.50 market price, revealing the platform's centralized control despite decentralization claims</cite>. <cite index=\"21-15,21-16\">The attacker was able to withdraw $6.26 million of the $7.17 million deposited before the protocol froze their withdrawals</cite>.","heading":"JELLY Market Manipulation Incident","severity":"critical","sources":[{"credibility":2,"name":"Explained: The Hyperliquid Hack (March 2025) - Halborn","type":"research","url":"https://www.halborn.com/blog/post/explained-the-hyperliquid-hack-march-2025"},{"credibility":1,"name":"HyperLiquid Delists JELLY - CoinDesk","type":"news_article","url":"https://www.coindesk.com/markets/2025/03/26/hyperliquid-delists-jellyjelly-after-vault-squeezed-in-usd13m-tussle"}]},{"content":"Beyond the JELLY incident, Hyperliquid has experienced multiple security issues throughout 2025. <cite index=\"16-5,16-9\">The platform received a C- risk grade due to multiple security incidents including the $13.5M JELLY exploit, a $21M private key compromise, and several vault exploits, revealing persistent security vulnerabilities</cite>. <cite index=\"19-1,19-8,19-9,19-10,19-11,19-12\">The Hyperliquid ecosystem also faced controversy when HyperVault, a project built on the platform, was accused of rug-pulling users for approximately $3.6 million, with suspicious transactions flagged by blockchain security firm PeckShield showing funds being bridged to Ethereum, converted to ETH, and funneled into Tornado Cash</cite>. These incidents highlight ongoing vulnerabilities in the broader ecosystem.","heading":"Additional Security Incidents","severity":"high","sources":[{"credibility":2,"name":"Is Hyperliquid Safe? Risk Grade C- - Hindenrank","type":"research","url":"https://hindenrank.com/blog/is-hyperliquid-safe"},{"credibility":1,"name":"Hyperliquid-Based Project Faces $3.6 Million Controversy - Yahoo Finance","type":"news_article","url":"https://finance.yahoo.com/news/hyperliquid-based-project-faces-3-093814438.html"}]},{"content":"Hyperliquid operates without traditional venture capital funding, which distinguishes it from most crypto projects. <cite index=\"36-3,36-6\">The platform's cofounder reiterated that no investor unlocks exist because it never raised external capital, with the 1.75 million tokens distributed exclusively to team members as part of vesting schedules</cite>. <cite index=\"3-27,3-28,3-29,3-30\">In 2024, Hyperliquid launched its native token HYPE via an airdrop to nearly 100,000 users, with over 20% distributed to core contributors under vesting until 2027-2028, and within three months HYPE achieved a market cap exceeding $9 billion</cite>. <cite index=\"32-25,32-26,32-27\">Recently, the platform has filed with the SEC to raise $1 billion through a SPAC merger, with proceeds intended for HYPE token purchases and ecosystem expansion</cite>.","heading":"Business Model and Funding","severity":"medium","sources":[{"credibility":2,"name":"Hyperliquid addresses external investor token sell-off - Cryptopolitan","type":"news_article","url":"https://www.cryptopolitan.com/hyperliquid-external-investor-token-sell-off/"},{"credibility":2,"name":"What Is Hyperliquid? - CoinLedger","type":"news_article","url":"https://coinledger.io/learn/what-is-hyperliquid"}]},{"content":"Despite security concerns, Hyperliquid has achieved significant market traction and technical performance. <cite index=\"3-5,3-42\">The platform has over 300,000 users and processes more than $4 billion in daily trading volume</cite>. <cite index=\"7-8\">Hyperliquid achieves sub-second finality and can handle up to 200,000 transactions per second</cite>. <cite index=\"6-15\">It has become the third-largest decentralized exchange in crypto, processing trillions of dollars in volume during its lifespan, trailing only PancakeSwap and Uniswap</cite>. <cite index=\"8-13,8-15\">The platform commands an estimated 70-80% of the decentralized perpetual futures trading market and consistently processes around $8 billion in daily trading volume with 30-day fee revenue reaching nearly $100 million</cite>.","heading":"Platform Performance and Features","severity":"low","sources":[{"credibility":2,"name":"What Is Hyperliquid? - CoinLedger","type":"news_article","url":"https://coinledger.io/learn/what-is-hyperliquid"},{"credibility":1,"name":"What Is Hyperliquid? The Decentralized Exchange - Yahoo Finance","type":"news_article","url":"https://finance.yahoo.com/news/hyperliquid-decentralized-exchange-own-blockchain-150103036.html"}]},{"content":"DeFiLlama recorded a security incident affecting Hyperliquid on June 15, 2023, with reported losses of $37K on Arbitrum. Classification: Ecosystem. Technique: CEX Price Manipulation Attack.","heading":"Hyperliquid — $37K (2023-06-15)","severity":"medium","sources":[{"credibility":1,"name":"Hyperliquid — $37K (2023-06-15)","type":"research","url":"https://defillama.com/hacks?protocol=Hyperliquid"}]}],"sources_used":[{"credibility":2,"name":"Hyperliquid Under Fire: Security Concerns - Brave New Coin","type":"news_article","url":"https://bravenewcoin.com/insights/hyperliquid-under-fire-security-concerns-amid-allegations-of-north-korean-exploitation"},{"credibility":2,"name":"Explained: The Hyperliquid Hack (March 2025) - Halborn","type":"research","url":"https://www.halborn.com/blog/post/explained-the-hyperliquid-hack-march-2025"},{"credibility":1,"name":"HyperLiquid Delists JELLY After Vault Squeezed - CoinDesk","type":"news_article","url":"https://www.coindesk.com/markets/2025/03/26/hyperliquid-delists-jellyjelly-after-vault-squeezed-in-usd13m-tussle"},{"credibility":1,"name":"What Is Hyperliquid? The Decentralized Exchange - Yahoo Finance","type":"news_article","url":"https://finance.yahoo.com/news/hyperliquid-decentralized-exchange-own-blockchain-150103036.html"},{"credibility":2,"name":"Is Hyperliquid Safe? Risk Grade C- - Hindenrank","type":"research","url":"https://hindenrank.com/blog/is-hyperliquid-safe"},{"credibility":2,"name":"What Is Hyperliquid? - CoinLedger","type":"news_article","url":"https://coinledger.io/learn/what-is-hyperliquid"},{"credibility":1,"name":"Hyperliquid — $37K (2023-06-15)","type":"research","url":"https://defillama.com/hacks?protocol=Hyperliquid"}],"summary":"Hyperliquid suffered a documented ecosystem incident with reported losses of $37K on Arbitrum. This page tracks DeFiLlama's record of the event.","timeline":[{"date":"2022-01-01","event":"Hyperliquid founded and built as decentralized exchange","source":"Is Hyperliquid Safe? - Whaleportal","source_url":"https://whaleportal.com/blog/is-hyperliquid-safe/"},{"date":"2023-02-01","event":"Mainnet closed alpha launched","source":"What Is Hyperliquid? The Decentralized Exchange - Yahoo Finance","source_url":"https://finance.yahoo.com/news/hyperliquid-decentralized-exchange-own-blockchain-150103036.html"},{"date":"2023-06-15","event":"Hyperliquid — $37K (2023-06-15)","source":"defillama.com","source_url":"https://defillama.com/hacks?protocol=Hyperliquid"},{"date":"2023-08-01","event":"Full mainnet launch","source":"What Is Hyperliquid? The Decentralized Exchange - Yahoo Finance","source_url":"https://finance.yahoo.com/news/hyperliquid-decentralized-exchange-own-blockchain-150103036.html"},{"date":"2024-11-01","event":"HYPE token airdrop worth $1.6 billion distributed to nearly 100,000 users","source":"What Is Hyperliquid? The Decentralized Exchange - Yahoo Finance","source_url":"https://finance.yahoo.com/news/hyperliquid-decentralized-exchange-own-blockchain-150103036.html"},{"date":"2024-12-23","event":"North Korean hacker allegations trigger over $256 million in withdrawals","source":"Hyperliquid Under Fire - Brave New Coin","source_url":"https://bravenewcoin.com/insights/hyperliquid-under-fire-security-concerns-amid-allegations-of-north-korean-exploitation"},{"date":"2025-03-26","event":"JELLY token manipulation incident causes $13.5 million loss to HLP vault","source":"HyperLiquid Delists JELLY - CoinDesk","source_url":"https://www.coindesk.com/markets/2025/03/26/hyperliquid-delists-jellyjelly-after-vault-squeezed-in-usd13m-tussle"},{"date":"2025-09-26","event":"HyperVault project accused of $3.6 million rug pull","source":"Hyperliquid-Based Project Faces Controversy - Yahoo Finance","source_url":"https://finance.yahoo.com/news/hyperliquid-based-project-faces-3-093814438.html"}]},"v":1}