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Bitget CEO slams Hyperliquid’s handling of “suspicious” incident involving JELLY token

Gracy Chen, CEO of cryptocurrency exchange Bitget, criticized Hyperliquid’s handling of a March 26 incident on its perpetual exchange, saying it put the network at risk of becoming “FTX 2.0.”

On March 26, Hyperliquid, a blockchain network specializing in trading, said it delisted perpetual futures contracts for the JELLY token and would reimburse users after identifying “evidence of suspicious market activity” tied to the instruments. 

The decision, which was reached by consensus among Hyperliquid’s relatively small number of validators, flagged existing concerns about the popular network’s perceived centralization.

“Despite presenting itself as an innovative decentralized exchange with a bold vision, Hyperliquid operates more like an offshore [centralized exchange],” Chen said, after saying “Hyperliquid may be on track to become FTX 2.0.”

FTX was a cryptocurrency exchange run by Sam Bankman-Fried, who was convicted of fraud in the US after FTX’s abrupt collapse in 2022. 

Chen did not accuse Hyperliquid of specific legal infractions, instead emphasizing what she considered to be Hyperliquid’s “immature, unethical, and unprofessional” response to the event.

“The decision to close the $JELLY market and force settlement of positions at a favorable price sets a dangerous precedent,” Chen said. “Trust—not capital—is the foundation of any exchange […] and once lost, it’s almost impossible to recover.”

Bitget CEO slams Hyperliquid’s handling of “suspicious” incident involving JELLY token

Source: Gracy Chen

Related: Hyperliquid delists JELLY perps, citing ‘suspicious’ activity

JELLY incident

The JELLY token was launched in January by Venmo co-founder Iqram Magdon-Ismail as part of a Web3 social media project dubbed JellyJelly. 

It initially reached a market capitalization of roughly $250 million before falling to the single digit millions in the ensuing weeks, according to DexScreener. 

On March 26, JELLY’s market cap soared to around $25 million after Binance, the world’s most popular crypto exchange, launched its own perpetual futures tied to the token. 

The same day, a Hyperliquid trader “opened a massive $6M short position on JellyJelly” and then “deliberately self-liquidated by pumping JellyJelly’s price on-chain,” Abhi, founder of Web3 company AP Collective, said in an X post.

BitMEX founder Arthur Hayes said initial reactions to Hyperliquid’s JELLY incident overestimated the network’s potential reputational risks.

“Let’s stop pretending hyperliquid is decentralised. And then stop pretending traders actually [care],” Hayes said in an X post. “Bet you $HYPE is back where [it] started in short order cause degens gonna degen.”

Bitget CEO slams Hyperliquid’s handling of “suspicious” incident involving JELLY token

Binance launched JELLY perps on March 26. Source: Binance

Growing pains

On March 12, Hyperliquid grappled with a similar crisis caused by a whale who intentionally liquidated a roughly $200 million long Ether (ETH) position. 

The trade cost depositors into Hyperliquid’s liquidity pool, HLP, roughly $4 million in losses after forcing the pool to unwind the trade at unfavorable prices. Since then, Hyperliquid has increased collateral requirements for open positions to “reduce the systemic impact of large positions with hypothetical market impact upon closing.” 

Hyperliquid operates the most popular leveraged perpetuals trading platform, controlling roughly 70% of market share, according to a January report by asset manager VanEck. 

Perpetual futures, or “perps,” are leveraged futures contracts with no expiry date. Traders deposit margin collateral, such as USDC, to secure open positions.

According to L2Beat, Hyperliquid has two main validator sets, each comprising four validators. By comparison, rival chains such as Solana and Ethereum are supported by approximately 1,000 and 1 million validators, respectively. 

More validators generally lessen the risk of a small group of insiders manipulating a blockchain. 

Magazine: What are native rollups? Full guide to Ethereum’s latest innovation

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US Supreme Court will not review IRS case involving Coinbase user data

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US Supreme Court will not review IRS case involving Coinbase user data

US Supreme Court will not review IRS case involving Coinbase user data

A lower court ruling will stand in a case involving a Coinbase user who filed a lawsuit against the IRS after the crypto exchange turned over transaction data.

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First US staking ETF to launch Wednesday, giving investors exposure to Solana

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First US staking ETF to launch Wednesday, giving investors exposure to Solana

First US staking ETF to launch Wednesday, giving investors exposure to Solana

REX Shares will launch the first US staked crypto ETF this week, giving investors direct exposure to SOL with staking rewards.

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Government accused of ‘stark’ contradiction over position on Gaza genocide allegations

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Government accused of 'stark' contradiction over position on Gaza genocide allegations

The government has won a long-running legal challenge about its decision to continue allowing the sale of spare parts for F-35 fighter jets to Israel, while suspending other arms licences over concerns about international humanitarian law in Gaza.

But a key part of its case has highlighted mixed messaging about its position on the risk of genocide in Gaza – and intensified calls for ministers to publish their own assessment on the issue.

PM braced for pivotal vote – politics latest

Lawyers acting for the government told judges “the evidence available does not support a finding of genocide” and “the government assessment was that…there was no serious risk of genocide occurring”.

Therefore, they argued, continuing to supply the F-35 components did not put the UK at risk of breaching the Genocide Convention.

This assessment has never been published or justified by ministers in parliament, despite numerous questions on the issue.

Some MPs argue its very existence contrasts with the position repeatedly expressed by ministers in parliament – that the UK is unable to give a view on allegations of genocide in Gaza, because the question is one for the international courts.

For example, just last week Deputy Prime Minister Angela Rayner told PMQs “it is a long-standing principle that genocide is determined by competent international courts and not by governments”.

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Situation in Gaza ‘utterly intolerable’

‘The UK cannot sit on our hands’

Green MP Ellie Chowns said: “The government insists only an international court can judge whether genocide is occurring in Gaza, yet have somehow also concluded there is ‘no serious risk of genocide’ in Gaza – and despite my urging, refuse to publish the risk assessments which lead to this decision.

“Full transparency on these risk assessments should not be optional; it is essential for holding the government to account and stopping further atrocity.

“While Labour tie themselves in knots contradicting each other, families are starving, hospitals lie in ruins, and children are dying.

“The UK cannot sit on our hands waiting for an international court verdict when our legal duty under the Genocide Convention compels us to prevent genocide from occurring, not merely seek justice after the fact.”

‘Why are these assessments being made?’

“This contradiction at the heart of the government’s position is stark,” said Zarah Sultana MP, an outspoken critic of Labour’s approach to the conflict in Gaza, who now sits as an independent after losing the party whip last summer.

“Ministers say it’s not for them to determine genocide, that only international courts can do so. Yet internal ‘genocide assessments’ have clearly been made and used to justify continuing arms exports to Israel.

“If they have no view, why are these assessments being made? And if they do, why refuse to share them with parliament? This Labour government, in opposition, demanded the Tories publish their assessments. Now in office, they’ve refused to do the same.”

Read more:
‘All I see is blood’
‘It felt like earthquakes’
MPs want Ukraine-style scheme for Gazans

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Routes for Palestinians ‘restricted’

Judges at the High Court ultimately ruled the case was over such a “sensitive and political issue” it should be a matter for the government, “which is democratically accountable to parliament and ultimately to the electorate, not the court”.

Dearbhla Minogue, a senior lawyer at the Global Legal Action Network, and a solicitor for Al-Haq, the Palestinian human rights group which brought the case, said: “This should not be interpreted as an endorsement of the government, but rather a restrained approach to the separation of powers.

“The government’s disgraceful assessment that there is no risk of genocide has therefore evaded scrutiny in the courts, and as far as we know it still stands.”

Palestinians inspect the damage at an UNRWA school sheltering displaced people that was hit in an Israeli air strike, in Gaza.
Pic Reuters
A Palestinian woman sits amid the damage at an UNRWA school sheltering displaced people. Pic: Reuters
Image:
Pics: Reuters

What is the government’s position?

Government lawyers argued the decision not to ban the export of F-35 parts was due to advice from Defence Secretary John Healey, who said a suspension would impact the whole F-35 programme and have a “profound impact on international peace and security”.

The UK supplies F-35 component parts as a member of an international defence programme which produces and maintains the fighter jets. As a customer of that programme, Israel can order from the pool of spare parts.

Labour MP Richard Burgon said the ruling puts the government under pressure to clarify its position.

“This court ruling is very clear: only the government and parliament can decide if F-35 fighter jet parts – that can end up in Israel – should be sold,” he said.

“So the government can no longer pass the buck: it can stop these exports, or it can be complicit in Israel’s genocide in Gaza.

“On many issues they say it’s not for the government to decide, but it’s one for the international courts. This washing of hands will no longer work.”

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Dozens dead in Gaza after Israeli strikes

Israel has consistently rejected any allegations of genocide.

Prime Minister Benjamin Netanyahu branded a recent UN report on the issue biased and antisemitic.

“Instead of focusing on the crimes against humanity and war crimes committed by the Hamas terrorist organisation… the United Nations once again chooses to attack the state of Israel with false accusations,” he said in a statement.

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‘Gaza disinformation campaign is deliberate’

The UK government has not responded to requests for comment over its contrasting messaging to parliament and the courts over allegations of genocide.

But in response to the judgement, a spokesperson said: “The court has upheld this government’s thorough and lawful decision-making on this matter.

“This shows that the UK operates one of the most robust export control regimes in the world. We will continue to keep our defence export licensing under careful and continual review.

“On day one of this Government, the foreign secretary ordered a review into Israel’s compliance with international humanitarian law (IHL).

“The review concluded that there was a clear risk that UK exports for the IDF (Israel Defence Forces) in the Gaza conflict might be used to commit or facilitate serious violations of IHL.

“In contrast to the last government, we took decisive action, stopping exports to the Israeli Defence Forces that might be used to commit or facilitate serious violations of international humanitarian law in Gaza.”

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