Hyperliquid Confirms Former Employee Behind HYPE Shorting Activity

Hyperliquid reiterated zero tolerance for insider trading after confirming a fired employee’s wallet was behind large HYPE shorts.

Hyperliquid has confirmed that a recent major shorting incident involving its own HYPE token was linked to a former employee who was fired in the first quarter of 2024 for insider trading.

In a statement issued this week, the decentralized perpetuals exchange said that on-chain analysis had verified that the wallet behind the activity belonged to the ex-employee. Hyperliquid reiterated its zero-tolerance policy towards trading misconduct.

Behind the HYPE dump

The revelation comes amid increased community scrutiny after unusually large short positions appeared on the platform, initially sparking speculation that major ‘whale traders’ or internal actors were responsible. A detective on a chain said that wallets connected to address 0x7Ae4, which it determined belonged to a former employee, are still actively holding HYPE shorts directly on the protocol.

Data from the chain also showed that 0x7Ae4 was first funded on the Arbitrum network by wallet 0xA2c5, which later transferred funds to address 0x5a62 on the Polygon network. This Polygon address appears to be associated with extensive activity on Polymarket under the account name ‘trytings’. Between September and November, 0x5a62 received approximately $66,000 in USDC from Hyperliquid.

On December 17, five days before the company’s public explanation, the same wallet deposited approximately $53,000 USDC back into Hyperliquid and opened leveraged short positions totaling approximately $223,000. These include a $180,000 HYPE short with 10x leverage and a $43,000 Bitcoin short with 40x leverage, while retaining approximately $63,000 in free margin.

Hyperliquid co-founder Iliensinc said employees and contractors are prohibited from trading HYPE derivatives, both long and short, and violations will result in immediate termination. The company said the policy is intended to ensure accountability and maintain alignment with the long-term health of the ecosystem.

Response to solvency and transparency claims

In a related development, Hyperliquid has pushed back against what it described as factually incorrect claims in a recent article, while reaffirming that the protocol is fully solvent, transparent and decentralized. The platform said that all USDC on HyperCore is verifiably accounted for on-chain, and noted that the report did not include native HyperEVM USDC balances.

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It also rejected accusations of retroactive volume manipulation, special user permissions and ‘godmode’ checks, clarifying that the features mentioned are for testnet only or are being misinterpreted. Hyperliquid said the entire state, including orders, transactions, fees and liquidations, is publicly verifiable by anyone operating a node.