Why has Hyperliquid become the 'new favorite' for money laundering? Since March 2025, Chinese law enforcement has uncovered three cases of cryptocurrency money laundering using the decentralized trading platform Hyperliquid! Even more shocking is that the operational methods in these cases are highly similar to the trading paths of well-known trader @JamesWynnReal! What is going on? How is Hyperliquid's high leverage mechanism being exploited?

1️⃣ Why has Hyperliquid become the 'new favorite' for money laundering? Hyperliquid (abbreviated as HL) is a decentralized derivatives trading platform (DEX), dubbed the 'on-chain Binance.' With its high-performance Layer-1 blockchain and low-latency trading experience, it rose rapidly in 2025. According to public data, the total value of Hyperliquid's open contracts has surpassed $10.1 billion, and its 24-hour transaction fee revenue has reached $5.6 million, with USDC locked amounting to $3.5 billion! Such achievements have made it a 'hunting ground' for crypto whales, attracting a large number of high-frequency traders and substantial funds.

However, Hyperliquid's high leverage mechanism and fully transparent order book design, while enhancing trading efficiency, have also provided opportunities for criminals. Since March 2025, Chinese law enforcement has found that criminals have used the characteristics of Hyperliquid to launder money, raising concerns in the industry about the platform's inadequate risk control measures.

2️⃣ Money laundering techniques revealed: How does high leverage liquidation 'whiten' funds? Criminals use Hyperliquid's high leverage liquidation mechanism for money laundering, and the specific operational methods can be simply broken down into the following steps:

Illegal funds enter Hyperliquid: Criminals transfer illicit gains (such as cryptocurrencies obtained through hacking, fraud, etc.) onto the platform.

Create liquidation losses: Use high leverage for high-risk trading on Hyperliquid, deliberately causing liquidation (i.e., account losses leading to liquidation), resulting in 'losses.'

Reverse position on centralized exchanges: At the same time, perform reverse operations on centralized exchanges (such as Binance, OKX), for example, shorting BTC on Hyperliquid while going long on BTC on centralized exchanges, thus legitimizing funds through 'profits.'

Funds whitening completed: Through this hedging strategy, illegal funds flow into centralized exchanges in the form of 'trading profits,' obscuring the illegal source of the funds.