Company Hyperliquid Confirms Former Employee Behind Large HYPE Shorting Activity

Company Hyperliquid has publicly confirmed that a recent large-scale shorting incident involving the native token HYPE was linked to a dismissed employee. On-chain analysis, according to the platform, verified that the wallet coordinating the short positions belonged to a former staffer who was terminated in Q1 2024 for insider trading. This confirmation follows intense community scrutiny after unusually large short positions appeared on the protocol and fueled speculation about whale activity or internal wrongdoing.

The on-chain investigation identified wallet address 0x7Ae4 as the origin of the positions and traced funding pathways across multiple networks. The analysis found that the wallet was initially funded on Arbitrum by address 0xA2c5, which later transferred funds to 0x5a62 on Polygon. The Polygon address reportedly links to broad activity on Company Polymarket under the account name "trytings." Between September and November, the Polygon address received approximately $66,000 USDC from Company Hyperliquid. On December 17, five days before Company Hyperliquid published its public clarification, the same wallet deposited roughly $53,000 USDC back into the protocol and opened leveraged short positions totaling about $223,000. The short exposure included a $180,000 HYPE short at 10x leverage and a $43,000 Bitcoin short at 40x leverage, while maintaining roughly $63,000 in free margin.

In response to the findings, Mr. Iliensinc, co-founder of Company Hyperliquid, reiterated that employees and contractors are explicitly prohibited from trading derivatives tied to HYPE, whether long or short. Company Hyperliquid emphasized that violations trigger immediate termination and that this policy exists to preserve accountability and the long-term health of the ecosystem. The company framed the action as evidence of its zero-tolerance policy toward trading misconduct and as part of broader efforts to maintain integrity on its decentralized perpetuals exchange.

Beyond the internal enforcement angle, Company Hyperliquid also pushed back against external reporting that it described as factually incorrect. The firm reaffirmed that the protocol remains fully solvent, transparent, and decentralized. Company Hyperliquid stated that all USDC on HyperCore is verifiably accounted for on-chain and criticized a recent article for excluding native HyperEVM USDC balances from consideration. The company denied allegations of retroactive volume manipulation, special user privileges, and any so-called "godmode" controls, explaining that cited functions were either testnet-only or misinterpreted by critics.

Company Hyperliquid also highlighted that its entire protocol state — including orders, trades, fees, and liquidations — can be publicly verified by anyone running a node. This emphasis on verifiability is intended to counter claims about hidden controls or privileged access and to reassure users about on-chain accountability. The wider community reaction underscores how sensitive decentralized platforms are to perceived governance failures and potential conflicts of interest, even when technical transparency exists.

Implications for markets: The incident illustrates the market risk posed by insiders with privileged knowledge or access, especially in environments that support high leverage. Large short positions in a native token like HYPE can exert outsized price pressure and raise questions about position limits, internal compliance, and monitoring. For traders and protocols alike, the episode is a reminder of the need for robust surveillance, clear conflict-of-interest policies, and rapid, transparent communication when irregular activity emerges.