Chinese authorities have intensified their crackdown on suspicious activities linked to Hyperliquid — a decentralized perpetual derivatives exchange (DEX) that enables anonymous, high-leverage trading. In recent months, at least three cases of money laundering involving Hyperliquid have been uncovered, where the platform allegedly served as a tool to conceal illicit profits through high-risk positions.
🔍 Fake Losses, Real Profits: How Mirror Trading Works
According to Mirror Tang, founder of the Web3 security firm Salus, the perpetrators used Hyperliquid to simulate surface-level losses on-chain while making actual profits on centralized exchanges. This was a mirror trading scheme where losses in one system acted as a cover for black-market earnings elsewhere.
Tang compared the method to that of James Tang, a trader recently liquidated several times. As trading volumes on Hyperliquid soared to 50% of Binance’s derivatives activity, Chinese authorities became increasingly concerned about financial crime.
⚙️ Hyperliquid: High Leverage, Full Anonymity, and Blockchain Shadows
Hyperliquid has gained popularity for allowing up to 40x leverage without any identity verification (no KYC). Users can open massive positions that are visible on-chain but unlinked to centralized exchange accounts. This makes it difficult to trace the origins of funds and allows clean withdrawals with no apparent link to illicit activity.
Investigators found clusters of suspicious liquidations reaching up to $99 million, possibly part of coordinated market manipulation. Some positions were allegedly left open deliberately to trigger liquidations and cause major price swings in Bitcoin and other assets.
🧬 Blockchain Forensics Expose Hidden Abuse
Prominent on-chain analyst ZachXBT uncovered that hacker William Parker exploited Hyperliquid for more than just laundering money — he also earned $20 million shorting the MELANIA meme coin.
Hyperliquid uses USDC as its main collateral, yet it remains beyond the reach of effective regulation. Even with over $2.76 billion in USDC flowing into Hyperliquid, freezes remain rare, and tokens are often held in liquidity vaults or private wallets outside the control of KYC platforms.
📉 TRUMP Token Becomes a Target of Insider Speculation
Hyperliquid also appears to be a tool for insider trading. A crypto advisor for World Liberty Fi, known as @cryptogle, recently opened a short position on the TRUMP token — an official meme coin tied to former President Donald Trump. After facing backlash from the community for perceived disloyalty, he defended himself by claiming that TRUMP and World Liberty Fi are unrelated projects.
The TRUMP token dropped to $9.72 but later rebounded. A whale’s entry at $9.48 put the position in a $60,000 loss, as the price climbed past the $12.48 liquidation level.
🧨 A Market Without Rules — Or a Case for Global Oversight?
The Hyperliquid case highlights how decentralized perpetual exchanges pose immense risks not only to investors but to global financial stability. In an unregulated environment, where trades are detached from identity, the line between strategy and financial crime becomes dangerously blurred.
#MoneyLaundering , #Hyperliquid , #CryptoCrime , #TrumpCrypto , #Regulation
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