Why Hyperliquid team must chill in prison

First of all

Hyperliquid didn’t invent anything new, but it perfected what already existed so well that it taught people to trade on-chain without fear of low liquidity, slow transactions, front-running, or terrible interfaces.
It freed on-chain trading from its inferiority complex toward centralized exchanges, brought on-chain futures trading to a completely new level and that must be acknowledged.
And the largest airdrop in DeFi history wasn’t just a marketing trick, it created a huge community around Hyperliquid while still managing to climb to the very top of CoinMarketCap.

Dead-end branch of evolution

However, Hyperliquid, for all its brilliance, might be exactly what the industry doesn’t need. Instead of raising the standards of DeFi, it risks dragging it back into the shadows by wiping its feet on both the users and the very principles that decentralized finance was built on.
DeFi wasn’t created as a playground for laundering money or as a convenient tool for manipulation, it was meant to prove that transparency and fairness could exist without centralized power.
But on-chain futures have shown the opposite: they bring the same speculation and systemic risk as centralized leverage markets, only now without moderation or responsibility.
Uniswap is an example of what traditional DeFi was meant to be. It’s an honest hand-to-hand exchange where every transaction is visible and every token traceable, which is exactly why no one can accuse Uniswap of lacking KYC or AML compliance.
Hyperliquid, on the other hand, opens an entire field for money laundering and manipulation. Abuses aren’t blocked or punished, they aren’t even detected. Without KYC or AML, the team can’t distinguish real trading from fake/dirty volume. All it does is make manipulation less profitable.

That’s not protection.
That’s moral laziness built into the architecture.

Amazon without moderation

Imagine a marketplace where anyone can list an item with no guarantees, where a buyer might receive a brick instead of an iPhone and have no recourse. In the Hyperliquid community there’s even a popular saying: “don’t cry in the casino”.
The only protection is the hope that scamming will be unprofitable: large non-refundable deposits to open seller account, reputation systems, automated items checks, and so on.
That is what Hyperliquid looks like in the world of derivatives.

Hyperliquid is an unmoderated marketplace for perpetual contracts: anyone can create volume, post positions, and manipulate prices, and nothing will stop them. Users are left to rely on economic disincentives rather than rules or enforcement: account blocks, freezes, or seizures of ill-gotten funds.
This is a dangerous trade-off. Economic friction can reduce abuse, but it does not prevent it and it certainly does not replace a real system of detection, blocking, and accountability as exists on many centralized exchanges.

Rare Mutation

Hyperliquid is a rare specimen that, at a fundamental level, combines the worst traits of CEXs with the worst traits of DEXs. From CEXs it inherited what should have been eliminated: centralized decision points, emergency delistings, and instantaneous interventions. In practice the system runs on a kind of private chain, nominally decentralized, effectively controlled by the team. This is my personal view, but don’t kid yourself: decentralization here is largely formal. From DEXs it inherited the familiar user problems: high fees (partly driven by early liquidations intended to keep an unmoderated system viable), no customer support, and zero guarantees of refunds in the face of obvious manipulation.

XPL case (pre-market). Hyperliquid’s XPL pre-market experienced a sharp price spike followed by a wave of liquidations that wiped out tens of millions in positions while XPL markets on some centralized venues remained comparatively stable. Post-mortems indicate the attack exploited thin liquidity and isolated price feeds, allowing large players to trigger a short squeeze and profit from cascading liquidations. This episode clearly illustrates how an unmoderated market design can turn liquidity and price-feed weaknesses into practical manipulation vectors.

OKX case (a contrast). According to OKX, the sudden OKB crash began with automatic liquidations of several large leveraged positions after the token fell from roughly $50.69 to about $48.36. The cascading liquidations then propagated through collateralized loans, margin trades, and cross-currency positions, briefly wiping out about $6.5 billion in diluted market cap before prices recovered. The exchange acknowledged broader negative market volatility that day but described the OKB collapse as abnormal, pledged additional risk-management measures and said it would consider compensation for affected users.

The contrast is clear: centralized venues have operational moderation levers: freezes, rollbacks, reimbursements; that can mitigate the fallout from such events. Hyperliquid, operating without robust KYC/AML and without those operational levers, leaves victims with far fewer remedies — turning architectural vulnerabilities into a practical threat to users and to the market’s reputation.

Hypernado Cash

Unlike a hand-to-hand swap on Uniswap, where every transfer can be followed on-chain and the money trail is continuous, Hyperliquid’s design breaks that direct trace. An actor can open a leveraged short on Account A (tainted funds) and a mirrored long on Account B (clean funds). If A is forced into liquidation while B realizes the corresponding profit, value has flowed from dirty to clean without a straightforward on-chain transfer linking the two.

This pattern - a wash trading / trade-based laundering variant can call “liquidation laundering” - exploits the lack of KYC/AML, weak monitoring of synchronized trading patterns, and the platform’s choice to treat abuse economically (making it less profitable) rather than prohibiting it. When identity controls are absent and pattern-based blocking is minimal, the market becomes a practical laundering vector.

I am not issuing a legal judgment. I am showing a plausible and repeatable mechanism by which anonymity + leverage + non-moderation can accomplish what sanctions, mixers and shell companies used to do, but via trades and liquidations instead of transfers.

Conclusion

Hyperliquid is a competitor to major venues — but it has one Achilles’ heel: its infrastructure can be crippled within hours if there’s intent. Maybe the time hasn’t come yet, or the platform simply functions as a convenient “mixer,” similar to services once used in the industry (see FTX and the subsequent allegations and investigations into misconduct, suspected money-laundering and political financing in the U.S.). At some point such services stop being useful to big players and regulators — and they can be neutralized fast: arrests of operators, server shutdowns, blocked withdrawals, legal bans, and so on.

Simply put: while the music is playing, but blockchain can be stopped in 10 seconds. Hyperliquid.