Hyperliquid Labs Faces Scrutiny Amid Withdrawals After Allegations of Suspicious Wallet Activity

Hyperliquid Labs, a leading on-chain perpetual futures exchange, faced scrutiny after allegations emerged of suspicious wallet activity on its platform.

Hyperliquid Labs, a leading on-chain perpetual futures exchange, faced scrutiny this week after allegations emerged of suspicious wallet activity on its platform.

According to reports, several wallets engaged in substantial ETH trades on Hyperliquid, leading to liquidations totaling over $700,000. However, a security expert suggested that these wallets may have been probing the platform for vulnerabilities.

“Certain entities don’t trade. They test,” said Taylor Monahan of MetaMask, implying the potential for a systematic evaluation of the platform’s security.

The allegations sparked significant user withdrawals, with data from Hashed’s Dune Analytics dashboard showing over $194 million in USDC withdrawn on Monday.

In response to the allegations, Hyperliquid Labs issued a statement denying any exploits or vulnerabilities linked to the suspicious wallet activity.

“Hyperliquid Labs is aware of reports circulating regarding activity by supposed addresses,” the team stated.

Hyperliquid denies exploits, highlights security measures

“There has been no exploit—or any exploit for that matter—of Hyperliquid. All user funds are accounted for.”

The platform highlighted its strong operational security measures, including a comprehensive bug bounty program and adherence to best practices in blockchain analytics.

Additionally, Hyperliquid Labs addressed claims of unprofessional interactions with an external security advisor, explaining that the individual behaved unprofessionally, prompting the team to seek advice from trusted partners instead.

After addressing the situation, the market reaction began to stabilize. The controversy initially caused a significant drop in Hyperliquid’s native token, HYPE, which fell over 25% from $34 to $25. However, the token has since rebounded and is currently trading at $27.

Hyperliquid commands a significant portion of on-chain perpetual futures trading volume, with Dune Analytics data indicating over 55% of the market share. As the situation unfolds, the platform’s resilience and prompt response have been crucial in restoring user confidence.