Hyperliquid faces scrutiny after a controversial move in the JELLY token market. Bitget CEO Gracy Chen has warned that it could follow FTX’s downfall. The exchange forcefully settled trades, causing a $10.6 million loss. Its $230 million vault now faces potential liquidation risks. Compliance concerns and market fairness issues continue to raise alarms.
Hyperliquid Faces Scrutiny After JELLY Token Market Incident
The decentralized exchange Hyperliquid is under criticism following its handling of the JELLY token market. In a recent X post, Bitget CEO Gracy Chen drew parallels between Hyperliquid and collapsed FTX after it affected users with a loss of around $10.6 million. Trading on the platform immediately settled all open positions, and the token was delisted, which caused various trading uncertainties. Users across the cryptocurrency world have shown their displeasure about the actions taken by the platform.
Bitget CEO Raises Concerns Over Forced Settlements
Bitget CEO Gracy Chen underscored the unprofessional and improper behavior displayed by Hyperliquid in its JELLY token market management practices. The exchange received criticism from Bitget CEO Gracy Chen, who did not approve of their actions to close trades and stop JELLY trading after the token price rose 230% within one hour. The immediate execution of a short-selling position resulted in market manipulation concerns because its sudden execution led to a $5 million loss that triggered liquidations.
Company director Chen predicted that additional occurrences of similar problems could create risks up to $240 million for Hyperliquid. Chen warned about potential future attacks on Hyperliquid that would occur if the problems remained unaddressed. According to a report, Hyperliquid Vault could be at risk of losing its entire $230 million fund due to short squeeze pressure.
Gracy Chen said, “Unless these issues are addressed, more altcoins may be weaponized against Hyperliquid—putting it at risk of becoming the next catastrophic failure in crypto.”
Compliance and Regulatory Concerns Surround Hyperliquid
Criticism surrounds Hyperliquid because it lacks tools for anti-money laundering (AML) and Know-Your-Customer (KYC) procedures. Despite its claims of decentralization, Hyperliquid functions just as an offshore centralized exchange platform does, according to Chen. Failure to follow compliance regulations enables illegal funds to escape notice without detection.
Former BitMEX CEO Arthur Hayes joins industry leaders who share similar apprehensions about Hyperliquid. The platform remains exposed to financial risks because users doubt its proper implementation of regulatory compliance procedures. The platform faces enhanced regulatory oversight because it neglects to handle key regulatory issues.
Structural Risks in Hyperliquid’s Trading Model
During his presentation Chen noted multiple problems with the product design from Hyperliquid. The combination of different vaults makes traders experience joint risk factors based on her observation. Mixed vault designs in the platform allow several traders to affect the entire user base, creating an unsteady trading environment.
Because of the JELLY token’s sudden price increase, Hyperliquid implemented emergency measures. Suspicious activity motivated the validator set at the exchange to remove JELLY tokens from trading. Traders who lost money due to trade settlement by predetermined prices strongly criticized the decision.
The industry faces dangerous implications, according to Chen because of this settlement practice. Trust functions as an essential element for ensuring the success of any exchange operation, according to her. Hyperliquid faces additional market-based risks because it fails to react to its market vulnerabilities.
Crypto Market Remains Cautious Amid Exchange Failures
Cryptocurrency traders continue to remember the FTX collapse vividly. The FTX bankruptcy continues to generate approximately $1 billion in overall costs during the proceedings. Total legal expenses from the FTX bankruptcy proceedings reached $1 billion because Sullivan & Cromwell LLP, along with other firms, collected more than $248 million in legal fees.
During this period of cryptocurrency exchange failure apprehension Chen warns about the security imperfections in Hyperliquid. Stronger compliance measures to avoid further collapses seem necessary because of the increasing calls for enhanced security measures. The way Hyperliquid handles current accusations will decide its capacity to sustain operations.
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