JELLY futures added to Binance and OKX platforms following Hyperliquid delisting and market manipulation controversy

The price surge of over 400% in Jelly Jelly (JELLY) due to a market manipulation event on Hyperliquid led to the delisting of the token's perpetuals by the derivatives exchange. This was followed by Binance and OKX listing JELLY futures, taking advantage of the volatility and drawing criticism for centralization concerns.

Hyperliquid delisted JELLY and reimbursed affected users after the market manipulation incident involving the Jelly Jelly (JELLY) token. Binance and OKX quickly listed JELLY futures, likely to capitalize on the token's extreme price fluctuation, which is attractive for speculative trading.

On March 26, JELLY's price jumped from around $0.0095 to a high of $0.050, an increase of approximately 426%. High volatility drives trading volume, and both exchanges stand to gain significantly from trading fees on JELLY perpetuals.

Some believe Binance and OKX's move is not just about potential profit from fees but also about eliminating a competitor. One user even compared it to Binance's alleged role in FTX's collapse, stating it "rewrites the history of what happened to FTX."

Blockchain investigator ZachXBT revealed that the two accounts linked to the manipulation, 0x20e8 and 0x67f, were funded via Binance.

Meanwhile, the price of JELLY has dropped to $0.020, according to CoinGecko.

The manipulation event

According to Arkham Intelligence, the trader opened three accounts: two with long positions worth $2.15 million and $1.9 million, and a third holding a $4.1 million short position, effectively balancing out the longs. The total amounted to $7.17M.

Hyperliquid was exploited. This is what happened:

A trader deposited $7.167M on 3 separate Hyperliquid accounts within 5 minutes of each other. He then made leveraged trades on an illiquid coin, JELLYJELLY.

However, he ended up losing money, and is down almost $1M unless…

The trader then aggressively bought JELLY on decentralized exchanges. Since liquidity on DEXes is low, their buying activity rapidly increased JELLY's price. After the token's price rose by over 400%, the $4.1 million short position was supposed to be liquidated. However, the liquidation was too large to be executed immediately, so it was transferred to HyperLiquid's automated market-making vault, the Hyperliquidity Provider. At the same time, the trader quickly withdrew funds from their other two accounts with unrealized profit from the JELLY 400%+ price increase as a result of their DEX buying activity. According to Arkham, the trader managed to withdraw $6.26 million, with ~$900K still remaining in the accounts.

HyperLiquid then restricted the trader's accounts to reduce-only mode, freezing their ability to withdraw funds. With withdrawals blocked, the trader started selling JELLY on the market.

This selling helped them recover some funds, but it didn't fully salvage their position because HyperLiquid then closed the market at $0.0095, the same price at which they opened their short trade. As a result, all floating PnL on the first two accounts were erased.

Abhi, founder of Web3 company AP Collective, said that if Hyperliquid didn't close the position, it would've faced full liquidation if JELLY reached a $150M market cap.

Following the incident, Hyperliquid decided to delist JELLY perpetuals. The decision was made by a consensus between Hyperliquid's validators, causing outrage from the crypto community due to centralization concerns. Arthur Hayer stated that HyperLiquid clearly couldn't handle the situation with JELLY and that it's time to stop pretending that HyperLiquid is a decentralized platform.

"HyperLiquid couldn't handle the $JELLY situation," Hayer said. "Let's stop pretending hyperliquid is decentralized, and then stop pretending traders actually care. Bet you $HYPE is back where it started in short order because degens will degen."

Gracy Chen, CEO of Bitget, echoed his sentiment:

"The decision to close the $JELLY market and force settlement of positions at a favorable price sets a dangerous precedent," Chen said. "Trust—not capital—is the foundation of any exchange […] and once lost, it’s almost impossible to recover."