Could Your DeFi Funds Be Next? Hyperliquid JELLY Exploit Alert!

Hyperliquid Faces Criticism Over $10.63 Million JELLY Token Exploit

The JELLY token exploit on Hyperliquid exchange has left users $10.63 million poorer. Industry experts are now analyzing what went wrong. Dr. Jan Philipp Fritsche,from Oak Security,believes this wasn’t a simple bug but a predictable failure.

Fritsche explained that the exploit involved market manipulation. A trader opened a $5 million short position on JELLY, then removed their margin. Hyperliquid was left holding the position. Other traders then coordinated a short squeeze.

“The attacker knew one side would collapse, and the other would cash out. The protocol suffered the loss, while the attacker walked away with millions,” Fritsche said. He called it a “textbook example of unpriced vega risk,” a term from traditional finance.

Many DeFi protocols still don’t account for this risk.Hyperliquid has promised to compensate affected users, but it’s reputation is damaged. Bitget CEO Gracy Chen criticized the exchange’s practices as “immature, unethical, and unprofessional.”

This incident highlights broader vulnerabilities in the decentralized finance sector. In 2024, DeFi exploits cost users $308.7 million, more than rug pulls, which accounted for $192.9 million. Just days later, SIR.trading fell victim to another exploit, losing $355,000.

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