Research summary
We reject Hyperliquid HLP because of both client eligibility and a market mechanism that has twice caused losses. Hyperliquid's Terms define persons residing, located, incorporated, or registered in the United States as Restricted Persons barred from its interface. HLP is also not passive protocol revenue. It runs market-making strategies, supplies USDC in Earn, and acts as the backstop liquidator when ordinary order-book liquidation fails. That last role caused roughly $4M of actual loss in March 2025 after a trader forced liquidation of a $271M ETH long. Later that month, the JELLY manipulation transferred a toxic short to HLP and ended only after validators voted to delist the market and impose a settlement price. A current SEC-filed third-party prospectus reports approximately $13.5M of HLP losses from the JELLY activity. The response added margin tiers and isolated the liquidator strategy, but it also proved that validators can alter a market outcome under pressure. A four-day deposit lock also means the client cannot exit when the risk first appears.
Observable review triggers
- Hyperliquid publishes terms permitting this registry's United States client population to deposit in HLP
- HLP completes 24 consecutive months without a realized market-mechanic loss exceeding 1% of vault equity
- Validator node software becomes open-source and emergency market-settlement authority is bounded by a published rule with an independent appeal path
- The four-day post-deposit withdrawal lock is removed or a verifiable emergency exit is added for new backstop-liquidation exposure
- Any further HLP loss caused by a position transferred through backstop liquidation opens an immediate off-cycle review
Facts on file
- Verdict
- Rejected
- Type
- Other
- Chains examined
- Hyperliquid L1
- Reviewed
- Last confirmed