Hyperliquid Accuses Former Employee of Insider Trading Involving HYPE Token Shorts

Hyperliquid, a leading decentralized perpetuals exchange, has publicly attributed recent suspicious shorting activity on its native HYPE token to a former employee who was terminated over a year ago.

(Sources: X)

Key Highlights

• The platform faced community accusations of insider trading after large short positions were traced to a linked wallet.
• Co-founder Iliensinc firmly denied team involvement and identified the activity as originating from an ex-employee dismissed in early 2024.
• Hyperliquid plans to permanently lock HYPE tokens held in its Assistance Fund address to reduce supply and support price stability.

Details of the Insider Trading Allegation

Community members initially raised alarms after noticing heavy shorting of HYPE tokens, with some speculating involvement from Hyperliquid insiders or its high-volume traders known as “Leviathans.” These elite users currently hold around $3.44 billion in open positions, split between $1.15 billion in longs and $2.29 billion in shorts.

On December 22, co-founder Iliensinc addressed the concerns directly on the project’s Discord server, stating that the suspicious wallet belonged to a former team member no longer affiliated with Hyperliquid Labs. He emphasized: “Their actions do not reflect our team’s standards or values.”

Iliensinc highlighted the platform’s rigorous internal trading policy, which strictly prohibits employees and contractors from trading HYPE derivatives—whether long or short—to maintain industry-leading accountability.

The controversy echoes an earlier incident in November, when community member cobe.hype flagged a wallet allegedly tied to the team selling approximately 4,000 HYPE tokens (worth about $134,000) in a single day.

Hyperliquid’s Trading Policy Overview

Platform Resilience and Upcoming Supply Reduction

Despite the controversy, Hyperliquid continues to demonstrate strong performance, quickly recovering from recent market downturns and maintaining its position as one of the top decentralized perpetuals platforms.

In a separate positive development announced last week, the team revealed plans to permanently lock away HYPE tokens stored in the protocol’s Assistance Fund address—currently valued at roughly $1 billion. This irreversible measure aims to meaningfully reduce circulating supply and potentially drive upward pressure on HYPE’s price.

Hyperliquid Insider Trading Incident FAQ

What exactly happened with the HYPE shorting allegations? Community members traced large short positions and token sales to a wallet initially believed to be team-controlled. Hyperliquid clarified it belonged to a former employee terminated in early 2024.

Is the current Hyperliquid team involved in any insider trading? No—co-founder Iliensinc explicitly denied any involvement from the existing team and stressed that the individual’s actions do not reflect current standards.

What is Hyperliquid’s policy on team members trading HYPE? Employees and contractors are strictly forbidden from trading HYPE derivatives in any form (long or short) to avoid conflicts and ensure accountability.

How much were the suspicious short positions worth? Hyperliquid’s “Leviathans” collectively hold $3.44 billion in open interest, with $2.29 billion in shorts—though the insider-linked activity was separate and smaller in scale.

What is the Assistance Fund lock-up plan? The team intends to make approximately $1 billion worth of HYPE tokens in the Assistance Fund address permanently inaccessible, effectively burning them to reduce total supply.

Will this incident impact Hyperliquid’s operations? The platform remains fully operational and continues to rank among the strongest performers in decentralized perpetuals trading.