The case of JELLY in Hyperliquid was a crypto scandal that began with a low-cap memecoin created by Iqram Magdon-Ismail.
An anonymous trader opened a short position of $6M in Hyperliquid, a perpetual futures DEX, and allegedly manipulated the price of JELLY in other markets, shooting it up by 400%. This generated an unrealized loss of $12M in Hyperliquid's vault, threatening its solvency. Binance and OKX listed JELLY, amplifying the chaos, which some saw as a coordinated attack. Hyperliquid closed the market and fixed the price at $0.0095, reversing losses and making a profit of $700K, while promising refunds to non-manipulating users. Although it avoided a collapse, the centralized intervention unleashed criticism from figures like Arthur Hayes, questioning its decentralization. The trader made $6.26M and retains 10% of JELLY. It was a pragmatic rescue, but at the cost of sacrificing DeFi principles, leaving doubts about Hyperliquid's model.