A trader responsible for recent "suspicious market activity" on Hyperliquid, which led to the freeze and delisting of the Jelly my Jelly (JELLY) memecoin, may have suffered losses of nearly $1 million.

According to blockchain analytics firm Arkham Intelligence, the trader attempted to exploit the system by manipulating price movements and withdrawing collateral before Hyperliquid’s liquidation mechanism could respond. In a post on X dated March 26, Arkham detailed how the trader opened three accounts within five minutes—two with long positions worth $2.15 million and $1.9 million, and a third with a $4.1 million short position meant to counteract the longs.

Arkham explained that this strategy allowed the trader to build leverage in an attempt to siphon funds from Hyperliquid.

When the price of JELLY surged over 400%, the $4 million short position was liquidated. However, because it was too large to be instantly processed, it was passed to the Hyperliquidity Provider Vault (HLP), which is responsible for handling liquidations.

Meanwhile, the trader withdrew collateral from the other two accounts while holding a "seven-figure positive PnL to withdraw from," Arkham reported.

Despite these maneuvers, the trader faced a setback when their accounts—still holding millions in unrealized gains—were restricted to reduce-only orders. This forced them to sell the tokens from the first account on the open market to recover funds.

Hyperliquid eventually shut down the JELLY token market at $0.0095, which coincided with the trader’s short position entry price. This action effectively nullified any floating profit and loss on the first two accounts used for the exploit.

In total, Arkham estimates that the trader managed to withdraw $6.26 million, though at least $1 million remains locked in the accounts.

"If he can access these funds in the future, his total cost from this exploit will be $4,000. If not, his losses could reach nearly $1 million," Arkham stated.

Following this incident, Hyperliquid has delisted perpetual futures for JELLY, citing market manipulation.

Other Traders Have Used Similar Tactics

This isn't the first time Hyperliquid has faced such issues. On March 14, the platform raised margin requirements after a large-scale Ethereum (ETH) liquidation caused its liquidity pool to lose millions.