Hyperliquid's JELLY Token Incident Sparks Criticism from Bitget CEO

Bitget CEO Gracy Chen has harshly criticized Hyperliquid's handling of the recent JELLY token incident, labeling the decentralized exchange's actions as "immature, unethical, and unprofessional."

Hyperliquid (HYPE) delisted the JELLY token following an estimated loss of $10.6 million, which could have led to liquidation threats to its treasury. Despite promising to compensate affected users, Chen argued that the losses and the way the situation was handled raised questions about the integrity of the exchange.

Chen accused the team of operating the DEX "like an offshore centralized exchange with no know-your-customer or anti-money-laundering checks." Chen made these remarks in a post on X, 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's comments suggest that Hyperliquid's behavior may be indicative of an "FTX 2.0," referencing the collapsed crypto exchange FTX, which imploded in 2022, affecting millions of users.

Arthus Hayes, the founder and former CEO of derivatives exchange BitMEX, shared similar views on X:

“$HYPE can’t handle the $JELLY

Let’s stop pretending hyperliquid is decentralised

And then stop pretending traders actually give a f***

Bet you $HYPE is back where it started in short order cause degens gonna degen”

Hyperliquid halted trading on the jellyjelly market after a $5 million short bet by a trader was liquidated, causing controversy amid an apparent coordinated pump scheme.

The JELLY price experienced a staggering 230% increase within an hour, leaving the Hyperliquid liquidity pool with a $10.6 million loss. A further spike would have increased this to over $240 million. The Hyperliquid validator set chose to delist the token, citing "suspicious market activity."

Chen commented:

"The decision to close the $JELLY market and force settlement of positions at a favorable price sets a dangerous precedent. Trust—not capital—is the foundation of any exchange (CEX and DEX alike), and once lost, it’s almost impossible to recover."

In addition to criticizing the delisting, Chen pointed out what she called "alarming flaws" in the DEX's design. Among these are systemic risk to users due to mixed vaults and unrestricted position sizes, which she said has left it open to manipulation.

"Unless these issues are addressed," she noted, "more altcoins may be weaponized against Hyperliquid—putting it at risk of becoming the next catastrophic failure in crypto."

Earlier this month, blockchain sleuth ZachXBT revealed that a Hyperliquid whale who made significant high-leverage short bets on the DEX was, in fact, a cybercriminal using stolen funds.

The HYPE token plunged by double digits following the incident.