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{"actor":"system:backfill","investigation_id":"a8402da3-b8e2-4106-9e39-00f3c9ebd6e6","kind":"publish","page_slug":"jelly","published_at":"2026-05-19T16:45:10.749Z","sequence_num":1,"snapshot":{"content_type":"investigation","entity_name":"JELLY","sections":[{"content":"JellyJelly (ticker: JELLYJELLY, commonly referred to as JELLY) is a Solana-based memecoin launched on January 29, 2025 via Pump.fun by Iqram Magdon-Ismail, co-founder of Venmo, and early investor Sam Lessin. The token was positioned as a utility token for the JellyJelly video chat application, which records, captions, and summarizes video calls. At launch, the token surged approximately 2,800x within two and a half hours, reaching a market capitalization of roughly $250 million. By the time of the Hyperliquid manipulation incident in late March 2025, market cap had declined to approximately $10–25 million, creating the conditions for a low-liquidity manipulation attack.","heading":"Token Background","severity":"medium","sources":[{"credibility":2,"name":"Venmo Founder's JELLYJELLY Solana Token Surges to $250 Million Market Cap — Decrypt","type":"news_article","url":"https://decrypt.co/303551/venmo-founders-jellyjelly-solana-token"},{"credibility":2,"name":"Venmo Co-Founder Releases Fair-Launch Token for New Platform, JellyJelly — The Defiant","type":"news_article","url":"https://thedefiant.io/news/nfts-and-web3/venmo-co-founder-releases-fair-launch-token-for-new-platform-jellyjelly"}]},{"content":"On March 26, 2025, a coordinated set of wallets executed what security researchers characterized as a 'self-liquidation' exploit against Hyperliquid's perpetuals market. Wallet 0xde9 opened a $4.1 million short position on JELLY perpetuals on Hyperliquid while two counterpart wallets — 0x20e and 0x67f — simultaneously opened long positions of $2.15 million and $1.9 million respectively, for a combined deposit of approximately $7.17 million. The long and short positions effectively neutralized each other's directional exposure. The attacker then aggressively purchased JELLY tokens on spot markets, pumping the price by approximately 429% within one hour. As the price rose, the 0xde9 short position was liquidated. Because the short position was too large to be absorbed by typical market participants, Hyperliquid's automated liquidation protocol transferred it to the Hyperliquidity Provider (HLP) vault — a market-making pool shared by liquidity providers. The HLP vault, now holding the toxic short as JELLY price continued to climb, accumulated unrealized losses that peaked at approximately $13.5 million. The attacker withdrew roughly $6.26 million before the protocol intervened, leaving approximately $900,000 frozen. On-chain analysis by ZachXBT and others identified that wallets 0x20e and 0x67f received funding from centralized exchanges including Binance, OKX, MEXC, and Bybit prior to executing the attack.","heading":"Manipulation Mechanics: The Self-Liquidation Attack","severity":"critical","sources":[{"credibility":2,"name":"JELLYJELLY Exploit on Hyperliquid — Arkham Intelligence","type":"research","url":"https://info.arkm.com/research/jellyjelly-exploit-on-hyperliquid"},{"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":2,"name":"Hyperliquid and the JELLY attack: Context, vulnerability and team solution — OAK Research","type":"research","url":"https://oakresearch.io/en/analyses/investigations/hyperliquid-jelly-attack-context-vulnerability-team-solution"},{"credibility":1,"name":"HyperLiquid Delists JELLY After Vault Squeezed in $13M Tussle — CoinDesk","type":"news_article","url":"https://www.coindesk.com/markets/2025/03/26/hyperliquid-delists-jellyjelly-after-vault-squeezed-in-usd13m-tussle"},{"credibility":2,"name":"Hyperliquid Controversy Deepens: ZachXBT Points Finger at Binance Wallets — CoinEdition","type":"news_article","url":"https://coinedition.com/hyperliquid-controversy-deepens-zachxbt-points-finger-at-binance-wallets/"}]},{"content":"The Hyperliquidity Provider (HLP) vault is Hyperliquid's shared market-making pool, holding approximately $230 million in assets at the time of the incident. When the 0xde9 short position was force-liquidated, it was transferred to the HLP vault as the liquidity provider of last resort. As JELLY's spot price continued to rise — fueled in part by Binance and OKX listing JELLY perpetuals during the incident — the HLP's unrealized losses grew rapidly. At peak, the HLP faced approximately $12–13.5 million in unrealized losses on the inherited short. This represented a systemic risk event, as the HLP's losses were socialized across all vault depositors. This was noted as the second major HLP stress event in March 2025; an earlier ETH liquidation event caused approximately $4 million in losses. The HYPE token, Hyperliquid's native governance token, dropped as much as 22% during the crisis before partially recovering to approximately 10% below pre-incident levels.","heading":"HLP Vault Exposure and Financial Impact","severity":"critical","sources":[{"credibility":2,"name":"Hyperliquid Came Inches From Losing Its $230M Vault Over a $6M JELLY Short — CCN","type":"news_article","url":"https://www.ccn.com/news/crypto/hyperliquid-losing-230m-vault-6m-jelly-short/"},{"credibility":2,"name":"HyperLiquid loses $13.5 million in alleged JELLYJELLY manipulation incident — Web3 Is Going Great","type":"news_article","url":"https://www.web3isgoinggreat.com/single/hyperliquid-manipulation"},{"credibility":1,"name":"Hyperliquid delists JELLYJELLY memecoin amid whale manipulation fiasco — The Block","type":"news_article","url":"https://www.theblock.co/post/348314/hyperliquid-delists-jellyjelly-memecoin-amid-whale-manipulation-fiasco"},{"credibility":2,"name":"HYPE Drops 14% After JELLY Short Squeeze: Is Hyperliquid Safe for Users? — Mitrade","type":"news_article","url":"https://www.mitrade.com/insights/news/live-news/article-3-721525-20250327"}]},{"content":"Facing mounting losses, Hyperliquid's validator set convened an emergency vote and reached quorum within approximately two minutes to delist JELLY perpetuals. All open positions were force-settled at a fixed price of $0.0095 — far below the market price of approximately $0.50 at the time of delisting, and coinciding with the original short entry price. Hyperliquid later announced that long position holders (except addresses flagged as participants in the manipulation) would be reimbursed by the Hyper Foundation at a more favorable settlement price of $0.037555. Critics noted that the swift validator intervention — in which just 16 validators effectively reversed market outcomes by resetting the oracle price — exposed that Hyperliquid operates with a level of centralized control inconsistent with its public claims of decentralization. Arthur Hayes, BitMEX co-founder, publicly stated 'Let's stop pretending Hyperliquid is decentralized.' Gracy Chen, CEO of Bitget, described Hyperliquid as a 'fake DEX.' The incident was characterized by Galois Capital as demonstrating a 'validator put' — an implicit guarantee that if HLP losses grow large enough, validators will intervene to cap them, undermining the principle of market-determined outcomes.","heading":"Hyperliquid's Emergency Response and Decentralization Controversy","severity":"high","sources":[{"credibility":1,"name":"A perp too far: Hyperliquid's 'validator put' — Blockworks","type":"news_article","url":"https://blockworks.co/news/hyperliquid-decentralization-validator-put"},{"credibility":2,"name":"Arthur Hayes calls Hyperliquid's demise after Jelly liquidation drama — Cryptopolitan","type":"news_article","url":"https://www.cryptopolitan.com/arthur-hayes-calls-hyperliquid-demise/"},{"credibility":2,"name":"Bitget Boss Gracy Chen Calls Hyperliquid a Fake DEX — CryptoNews","type":"news_article","url":"https://cryptonews.com/news/bitget-gracy-chen-hyperliquid-fake-dex/"},{"credibility":2,"name":"Hyperliquid sets Jelly trades renewing code is law debate — Bits of Blocks","type":"news_article","url":"https://www.bitsofblocks.io/post/hyperliquid-sets-jelly-trades-renewing-code-is-law-debate"},{"credibility":1,"name":"Hyperliquid Delists JELLYJELLY Perpetual Futures After $12 Million Market Manipulation — Yahoo Finance","type":"news_article","url":"https://finance.yahoo.com/news/hyperliquid-delists-jellyjelly-perpetual-futures-005949412.html"}]},{"content":"Blockchain investigator ZachXBT published findings identifying that the wallets used to execute the JELLY manipulation — specifically 0x20e and 0x67f — received funding from centralized exchanges including Binance, OKX, MEXC, and Bybit prior to the attack. ZachXBT alleged that five addresses connected to the manipulation entity held approximately 10% of JELLY's total supply on Solana, valued at roughly $2 million. ZachXBT criticized Hyperliquid for inconsistent enforcement, contrasting the platform's rapid validator response to the JELLY incident with its alleged inaction during the Radiant Capital hack by DPRK-linked actors — an incident affecting thousands of victims — during which Hyperliquid had previously claimed it could not intervene. ZachXBT concluded: 'I have little interest in helping Hyperliquid if they have an incident after seeing how they choose to approach them.' He accused Hyperliquid of 'mimicking the centralized playbook of FTX.'","heading":"ZachXBT's Analysis and Criticism","severity":"high","sources":[{"credibility":2,"name":"ZachXBT Raises Decentralization Questions to Hyperliquid, Post JELLY Response — The News Crypto","type":"news_article","url":"https://thenewscrypto.com/zachxbt-raises-decentralization-questions-to-hyperliquid-post-jelly-response/"},{"credibility":2,"name":"Hyperliquid Controversy Deepens: ZachXBT Points Finger at Binance Wallets — CoinEdition","type":"news_article","url":"https://coinedition.com/hyperliquid-controversy-deepens-zachxbt-points-finger-at-binance-wallets/"},{"credibility":2,"name":"Hyperliquid Loop: JELLYJELLY Manipulations, $12 Million Losses, and Questions of Decentralization — INCRYPTED","type":"news_article","url":"https://incrypted.com/en/hyperliquid-loop-jellyjelly-manipulations-12-million-losses-and-questions-of-decentralization/"}]},{"content":"During the crisis, community members on social media alleged that the attack may have been coordinated with or exploited by competing centralized exchanges. Binance and OKX both listed JELLY perpetuals during the active manipulation window, which further amplified spot price pressure on Hyperliquid's HLP vault. ZachXBT's on-chain analysis indicated the attacking wallets received funding from these same exchanges prior to the attack. Some commentators, including on Cryptoslate, raised 'FTX-like takedown' theories suggesting the attack was an intentional effort by competitors to destabilize Hyperliquid. These theories remain alleged and unproven. Binance has not publicly responded to the funding connection claims.","heading":"Alleged Coordinated Competitor Involvement","severity":"high","sources":[{"credibility":2,"name":"Binance listing manipulated Jelly token spurs 'FTX-like' takedown rumors for HyperLiquid — CryptoSlate","type":"news_article","url":"https://cryptoslate.com/binance-listing-manipulated-jelly-token-spurs-ftx-like-takedown-rumors-for-hyperliquid/"},{"credibility":2,"name":"What Is The JELLY Crypto Drama? Are Binance Trying To Sabotage Hyperliquid? — 99Bitcoins","type":"news_article","url":"https://99bitcoins.com/news/what-is-the-jelly-crypto-drama-are-binance-trying-to-sabotage-hyperliquid/"}]},{"content":"Following the JELLY incident, Hyperliquid announced several structural changes. The Liquidator vault within HLP was restructured to hold smaller positions, rebalance less frequently, and employ more sophisticated liquidation handling. Automatic Deleveraging (ADL) was modified to activate only when Liquidator vault losses exceed defined thresholds, preventing cascading fund transfers between vaults. Open Interest caps were made more dynamic to better reflect real-time market conditions and token liquidity. Most significantly, Hyperliquid introduced a fully on-chain validator voting mechanism for asset delisting, enabling a quorum of validator stakes to trigger asset removal without off-chain coordination — formalizing the de facto process used during the JELLY crisis. Hyperliquid also upgraded its blockchain validator set structure and announced plans to increase the number of validators over time to reduce centralization risk.","heading":"Post-Incident Risk Management Reforms","severity":"medium","sources":[{"credibility":2,"name":"Hyperliquid Announces Key Risk Management Updates Following JELLY Market Incident — CryptoPotato","type":"news_article","url":"https://cryptopotato.com/hyperliquid-announces-key-risk-management-updates-following-jelly-market-incident/"},{"credibility":2,"name":"Hyperliquid makes validator changes after Jelly delisting criticism — Cryptopolitan","type":"news_article","url":"https://www.cryptopolitan.com/hyperliquid-makes-validator-changes-jelly/"},{"credibility":2,"name":"Hyperliquid upgrades security following JELLY token incident — Crypto.news","type":"news_article","url":"https://crypto.news/hyperliquid-implements-security-upgrades-following-jelly-liquidation-incident/"},{"credibility":2,"name":"Hyperliquid to Refund JELLY Traders, Updates Its Risk Strategy — CryptoTimes","type":"news_article","url":"https://www.cryptotimes.io/2025/03/28/hyperliquid-to-refund-jelly-traders-updates-its-risk-strategy/"}]},{"content":"The JELLY incident highlighted a structural vulnerability in perpetuals DEX design: when a low-liquidity spot market underlies a perpetuals contract, a sufficiently capitalized actor can manipulate the oracle price to force liquidations that the platform's own liquidity vault must absorb. Security researchers at Halborn and OAK Research noted that the attack required relatively modest capital — approximately $7.17 million deposited — to threaten a $230 million vault. This capital efficiency ratio makes low-cap memecoins attractive targets for similar attacks on any DEX that automatically inherits liquidated positions. The incident is cited alongside earlier Hyperliquid ETH liquidation events as evidence of systemic design risk in hybrid DEX/market-maker architectures.","heading":"Systemic Risk: Low-Cap Token Perpetuals on DEXes","severity":"high","sources":[{"credibility":2,"name":"Hyperliquid and the JELLY attack: Context, vulnerability and team solution — OAK Research","type":"research","url":"https://oakresearch.io/en/analyses/investigations/hyperliquid-jelly-attack-context-vulnerability-team-solution"},{"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":2,"name":"Hyperliquid Under Attack: Three Things They Must Do Now — Arrington Capital","type":"research","url":"https://www.arringtoncapital.com/blog/hyperliquids-tipping-point-three-things-they-must-do-now/"}]}],"sources_used":[{"credibility":2,"name":"JELLYJELLY Exploit on Hyperliquid — Arkham Intelligence","type":"research","url":"https://info.arkm.com/research/jellyjelly-exploit-on-hyperliquid"},{"credibility":1,"name":"HyperLiquid Delists JELLY After Vault Squeezed in $13M Tussle — 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":"Hyperliquid delists JELLYJELLY memecoin amid whale manipulation fiasco — The Block","type":"news_article","url":"https://www.theblock.co/post/348314/hyperliquid-delists-jellyjelly-memecoin-amid-whale-manipulation-fiasco"},{"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":2,"name":"Hyperliquid and the JELLY attack: Context, vulnerability and team solution — OAK Research","type":"research","url":"https://oakresearch.io/en/analyses/investigations/hyperliquid-jelly-attack-context-vulnerability-team-solution"},{"credibility":2,"name":"HyperLiquid loses $13.5 million in alleged JELLYJELLY manipulation incident — Web3 Is Going Great","type":"news_article","url":"https://www.web3isgoinggreat.com/single/hyperliquid-manipulation"},{"credibility":2,"name":"HyperLiquid and JELLY JELLY: Everything You Need to Know — BeInCrypto","type":"news_article","url":"https://beincrypto.com/hyperliquid-jelly-jelly-short-squeeze-binance-liquidations/"},{"credibility":2,"name":"Hyperliquid Controversy Deepens: ZachXBT Points Finger at Binance Wallets — CoinEdition","type":"news_article","url":"https://coinedition.com/hyperliquid-controversy-deepens-zachxbt-points-finger-at-binance-wallets/"},{"credibility":2,"name":"ZachXBT Raises Decentralization Questions to Hyperliquid, Post JELLY Response — The News Crypto","type":"news_article","url":"https://thenewscrypto.com/zachxbt-raises-decentralization-questions-to-hyperliquid-post-jelly-response/"},{"credibility":1,"name":"A perp too far: Hyperliquid's 'validator put' — Blockworks","type":"news_article","url":"https://blockworks.co/news/hyperliquid-decentralization-validator-put"},{"credibility":2,"name":"Arthur Hayes calls Hyperliquid's demise after Jelly liquidation drama — Cryptopolitan","type":"news_article","url":"https://www.cryptopolitan.com/arthur-hayes-calls-hyperliquid-demise/"},{"credibility":2,"name":"Bitget Boss Gracy Chen Calls Hyperliquid a Fake DEX — CryptoNews","type":"news_article","url":"https://cryptonews.com/news/bitget-gracy-chen-hyperliquid-fake-dex/"},{"credibility":2,"name":"Hyperliquid Announces Key Risk Management Updates Following JELLY Market Incident — CryptoPotato","type":"news_article","url":"https://cryptopotato.com/hyperliquid-announces-key-risk-management-updates-following-jelly-market-incident/"},{"credibility":2,"name":"Hyperliquid makes validator changes after Jelly delisting criticism — Cryptopolitan","type":"news_article","url":"https://www.cryptopolitan.com/hyperliquid-makes-validator-changes-jelly/"},{"credibility":2,"name":"Binance listing manipulated Jelly token spurs 'FTX-like' takedown rumors — CryptoSlate","type":"news_article","url":"https://cryptoslate.com/binance-listing-manipulated-jelly-token-spurs-ftx-like-takedown-rumors-for-hyperliquid/"},{"credibility":2,"name":"Venmo Founder's JELLYJELLY Solana Token Surges to $250 Million Market Cap — Decrypt","type":"news_article","url":"https://decrypt.co/303551/venmo-founders-jellyjelly-solana-token"},{"credibility":1,"name":"How the Hype for Hyperliquid's Vault Evaporated on Concerns Over Centralization — CoinDesk","type":"news_article","url":"https://www.coindesk.com/business/2025/04/10/how-the-hype-for-hyperliquid-s-vault-evaporated-on-concerns-over-centralization"},{"credibility":2,"name":"Hyperliquid Under Attack: Three Things They Must Do Now — Arrington Capital","type":"research","url":"https://www.arringtoncapital.com/blog/hyperliquids-tipping-point-three-things-they-must-do-now/"},{"credibility":2,"name":"Hyperliquid Loop: JELLYJELLY Manipulations, $12 Million Losses, and Questions of Decentralization — INCRYPTED","type":"news_article","url":"https://incrypted.com/en/hyperliquid-loop-jellyjelly-manipulations-12-million-losses-and-questions-of-decentralization/"},{"credibility":2,"name":"Hyperliquid to Refund JELLY Traders, Updates Its Risk Strategy — CryptoTimes","type":"news_article","url":"https://www.cryptotimes.io/2025/03/28/hyperliquid-to-refund-jelly-traders-updates-its-risk-strategy/"}],"summary":"JELLY (JellyJelly / JELLYJELLY) is a Solana memecoin launched in January 2025 by Venmo co-founder Iqram Magdon-Ismail that became the center of a major market manipulation incident on Hyperliquid on March 26, 2025. A coordinated trader used a self-liquidation strategy — opening large opposing long and short positions — to force Hyperliquid's HLP liquidity vault to absorb a toxic short, causing up to $13.5 million in unrealized losses before validators emergency-delisted the token and force-settled all positions at a fixed price. The incident triggered widespread criticism of Hyperliquid's decentralization claims and raised systemic questions about perpetuals DEX risk management.","timeline":[{"date":"2025-01-29","event":"JellyJelly (JELLYJELLY) token launched on Pump.fun by Venmo co-founder Iqram Magdon-Ismail and investor Sam Lessin. Token reaches $250 million market cap within hours.","source":"Decrypt","source_url":"https://decrypt.co/303551/venmo-founders-jellyjelly-solana-token"},{"date":"2025-03-26","event":"Coordinated wallets (0xde9, 0x20e, 0x67f) deposit approximately $7.17 million across Hyperliquid accounts, opening opposing long and short positions on JELLY perpetuals.","source":"Arkham Intelligence","source_url":"https://info.arkm.com/research/jellyjelly-exploit-on-hyperliquid"},{"date":"2025-03-26","event":"Attacker pumps JELLY spot price approximately 429% across multiple exchanges. The 0xde9 short position is liquidated and transferred to the HLP vault, which cannot clear the position.","source":"Halborn Security","source_url":"https://www.halborn.com/blog/post/explained-the-hyperliquid-hack-march-2025"},{"date":"2025-03-26","event":"HLP vault unrealized losses peak at approximately $13.5 million as JELLY price continues to rise. Attacker withdraws approximately $6.26 million before intervention.","source":"Web3 Is Going Great","source_url":"https://www.web3isgoinggreat.com/single/hyperliquid-manipulation"},{"date":"2025-03-26","event":"Binance and OKX list JELLY perpetuals, adding further spot price pressure. Community members allege competitor coordination.","source":"CryptoSlate","source_url":"https://cryptoslate.com/binance-listing-manipulated-jelly-token-spurs-ftx-like-takedown-rumors-for-hyperliquid/"},{"date":"2025-03-26","event":"Hyperliquid validators reach emergency quorum within approximately two minutes. JELLY perpetuals are delisted and all positions force-settled at $0.0095, far below the market price of approximately $0.50.","source":"CoinDesk","source_url":"https://www.coindesk.com/markets/2025/03/26/hyperliquid-delists-jellyjelly-after-vault-squeezed-in-usd13m-tussle"},{"date":"2025-03-26","event":"HYPE token drops up to 22% following the delisting controversy. Arthur Hayes publicly states Hyperliquid is not decentralized.","source":"Cryptopolitan","source_url":"https://www.cryptopolitan.com/arthur-hayes-calls-hyperliquid-demise/"},{"date":"2025-03-27","event":"ZachXBT publishes on-chain analysis linking attacking wallets to Binance and other CEX funding sources. He criticizes Hyperliquid for selective enforcement and inconsistency with prior hack responses.","source":"The News Crypto","source_url":"https://thenewscrypto.com/zachxbt-raises-decentralization-questions-to-hyperliquid-post-jelly-response/"},{"date":"2025-03-28","event":"Hyperliquid announces JELLY long holders will be reimbursed at $0.037555 (vs $0.0095 settlement price) by the Hyper Foundation, except flagged addresses.","source":"CryptoTimes","source_url":"https://www.cryptotimes.io/2025/03/28/hyperliquid-to-refund-jelly-traders-updates-its-risk-strategy/"},{"date":"2025-03-28","event":"Hyperliquid announces four risk management reforms: HLP liquidator vault restructuring, ADL threshold changes, dynamic OI caps, and on-chain validator voting for asset delisting.","source":"CryptoPotato","source_url":"https://cryptopotato.com/hyperliquid-announces-key-risk-management-updates-following-jelly-market-incident/"},{"date":"2025-04-10","event":"CoinDesk reports on lasting reputational and capital flight impact from the JELLY incident, noting HLP vault deposits declined significantly amid decentralization concerns.","source":"CoinDesk","source_url":"https://www.coindesk.com/business/2025/04/10/how-the-hype-for-hyperliquid-s-vault-evaporated-on-concerns-over-centralization"}]},"v":1}