Attacker Loses $3M in a $5M Heist on Hyperliquid Vault

Attacker Loses $3M in a $5M Heist on Hyperliquid Vault

A recent coordinated attack on the decentralized derivatives platform Hyperliquid led to nearly $5 million in losses for its Hyperliquidity Provider (HLP) vault.

Key Takeaways:

An attacker burned $3 million to manipulate Hyperliquid’s POPCAT market.
The action resulted in nearly $5 million in losses at the platform’s Hyperliquidity Provider vault.
The exploit involved distributing funds across 19 wallets and initiating $26 million in leveraged long positions, followed by a deceptive $20 million buy wall that triggered a series of liquidations.

The incident unfolded after an anonymous trader intentionally sacrificed $3 million to manipulate the POPCAT market, causing a chain reaction of liquidations.

Breakdown of the Attack on Hyperliquid

According to blockchain analytics firm Lookonchain, the attack initiated when the perpetrator withdrew $3 million in USDC from the OKX exchange, which was then allocated across 19 newly created wallets.

The trader utilized these funds on Hyperliquid, opening over $26 million in leveraged long positions in HYPE, the protocol’s POPCAT-linked perpetual contract.

Subsequently, the attacker set up a $20 million buy wall near the $0.21 price level, creating a false sense of high demand that made the market price rise temporarily. When this wall abruptly vanished, the price support collapsed, leaving liquidity drained, and resulting in multiple overleveraged positions that were automatically liquidated.

As a result, Hyperliquid’s vault bore the brunt of the fallout, facing a $4.9 million deficit—one of the largest losses recorded in a single event in its history.

Ironically, the attacker’s own $3 million stake was completely wiped out. Analysts suggest that this indicates the motive was to disrupt the system rather than to gain financially, characterizing the act as a deliberate stress test of Hyperliquid’s liquidity framework.

In contrast to typical market exploits aimed at profit, this tactic seemed focused on revealing vulnerabilities in automated liquidity provider vaults.

Community reactions ranged from disbelief to sarcastic humor. One observer referred to it as “the costliest research ever,” while another remarked it resembled “performance art with real money.” Others highlighted the episode as a representation of the high risks in operating perpetual markets lacking robust liquidity buffers. “Perp markets are open season for anyone willing to light money on fire,” said one user on X.

In the wake of the incident, community member Conor shared that Hyperliquid temporarily halted withdrawals, invoking the platform’s “vote emergency lock” function—a protective measure against further manipulation.

Withdrawals resumed roughly an hour later, although the team did not officially tie this pause to the POPCAT-related event.

Hyperliquid Strategies Aims for $1B to Dominate HYPE Token Holdings

In a related development, Hyperliquid Strategies has filed with the US Securities and Exchange Commission (SEC) to raise as much as $1 billion, intending to use the funds to enhance its crypto holdings and acquire more HYPE tokens.

This initiative represents a significant step in the firm’s efforts to solidify its position in the decentralized derivatives sector.

Chardan Capital Markets is advising on the offering, which includes the sale of up to 160 million shares of common stock.

This effort follows a merger between Sonnet BioTherapeutics and Rorschach I LLC, a SPAC deal that will create the new Hyperliquid Strategies entity.

Upon completion, David Schamis will assume the role of CEO, while Bob Diamond, a former Barclays chief, will become chairman.

Following the filing announcement, HYPE token prices surged by 8% to $37.73, despite a slight decline in the broader crypto market.

Once the merger is finalized, Hyperliquid Strategies is expected to own 12.6 million HYPE tokens valued at approximately $470 million and hold an additional $305 million in cash available for future acquisitions, making it the largest institutional holder of HYPE tokens.