Hyperliquid Breaks Silence: Inside the HYPE Token Shorting Controversy That’s Shaking Crypto

Hyperliquid just stepped into the spotlight—not with another product launch, but with a direct response to its community's growing unease. The focus? The ability to short its own HYPE token on the platform.

Community Backlash: A Feature or a Flaw?

Traders noticed the option and the questions started flying. Is this a built-in mechanism for price discovery, or does it signal a lack of confidence from the platform itself? The debate ripped through forums, with accusations flying faster than a memecoin pump.

The Official Line: Mechanics Over Morals

In its response, Hyperliquid's team didn't offer apologies or philosophical musings. They stuck to the mechanics. The functionality exists within the protocol's design—a neutral feature available to all market participants. Their stance frames it as a matter of market integrity, not sentiment.

Why This Cuts Deeper Than Usual

This isn't just about another token's price action. It's a meta-crisis. A platform's native token represents its economic heartbeat and a proxy for user belief. When users can bet against that heartbeat on the very platform that issued it, it creates a psychological rift—a classic case of the infrastructure potentially profiting from its own community's doubt. It's the kind of cynical, self-referential finance move that would make a legacy banker smirk.

The real test for Hyperliquid won't be in this week's charts. It's whether this transparency rebuilds trust or simply gives traders a clearer map of the exits.

TLDR

• Hyperliquid confirms an ex-employee was responsible for shorting 4,000 HYPE tokens in November 2024.
• The ex-employee was terminated in early 2024, and their actions do not reflect Hyperliquid’s standards.
• Hyperliquid’s strict trading policy prohibits employees from engaging in HYPE token derivatives trading.
• Despite recent volatility, Hyperliquid maintains dominance in the perpetual DEX market with $653 billion in Q2 2025 volume.

In response to growing concerns from its community, Hyperliquid has confirmed that an ex-employee was behind the shorting of HYPE tokens. The decentralized perpetuals exchange addressed the situation following allegations that a wallet linked to the team was responsible for selling large amounts of HYPE tokens.

NEW: HYPERLIQUID TEAM CLARIFIES THAT AN ADDRESS SHORTING $HYPE, SPOTTED BY THE COMMUNITY, BELONGS TO AN EX-EMPLOYEE TERMINATED IN Q1 2024 – "THIS INDIVIDUAL IS NO LONGER ASSOCIATED WITH HYPERLIQUID LABS, AND THEIR ACTIONS DO NOT REFLECT OUR TEAM’S STANDARDS OR VALUES" pic.twitter.com/Za3vQDhuMq

— DEGEN NEWS (@DegenerateNews) December 22, 2025

The clarification comes after a community member pointed out that a specific wallet had sold about 4,000 HYPE tokens, valued at approximately $134,000, in a single day in November 2024. The community questioned whether this action was related to insider trading. Hyperliquid’s co-founder Iliensinc responded on Discord, clarifying that the wallet in question belonged to a former employee, who was dismissed in the first quarter of 2024.

Hyperliquid’s Response to Allegations

Iliensinc addressed the matter in detail, assuring the community that the individual involved was no longer associated with Hyperliquid Labs. He emphasized that the actions of the ex-employee did not align with the company’s standards or values. Hyperliquid maintains a strict trading policy that prohibits employees and contractors from engaging in trading activities related to the HYPE token, including shorting or going long.

“We are committed to the highest ethical standards,” Iliensinc stated in the Discord post. “Trading based on material non-public information is fundamentally prohibited, and we take any breach of this policy very seriously.”

Strict Policies for Employees and Contractors

Hyperliquid’s policies are designed to ensure transparency and fairness within its platform. The company has made it clear that employees and contractors must adhere to strict ethical guidelines regarding the HYPE token. These rules are in place to prevent any potential misuse of privileged information or influence over the token’s market behavior.

Iliensinc highlighted that the strict trading policy also extends to sharing confidential information with third parties. Hyperliquid’s leadership has reiterated its commitment to a fair and accountable trading environment, holding all individuals associated with the project to high ethical standards.

Hyperliquid’s Market Position and Future Outlook

Despite the shorting controversy, Hyperliquid remains a dominant player in the decentralized perpetual (perp) exchange market. The platform has seen significant growth, handling $653 billion in trading volume during Q2 2025. This accounts for approximately 73% of the perpetual DEX market, according to CoinGecko’s report.

The HYPE token, launched in late 2024, has seen significant price fluctuations, with its value peaking NEAR $60 in mid-September 2025 before dropping to $25.40 at the time of writing. Although it has faced some volatility, the token has still managed to rise by approximately 290% since its launch. Industry figures, including Arthur Hayes, have praised Hyperliquid for its impressive growth and market position.

Hyperliquid’s Commitment to Ethical Standards

Hyperliquid’s leadership has consistently emphasized its commitment to ethical trading practices. The company has reiterated that the actions of its former employee do not reflect the values or policies of Hyperliquid Labs.

As the platform continues to grow and maintain its position as a leader in the perp DEX space, the company is working to ensure that all its trading activities remain transparent and in line with its established ethical guidelines.

This incident has highlighted the importance of clear policies and transparency in the decentralized finance (DeFi) sector, and Hyperliquid aims to set an example for accountability and fair practice.