# Why Ketju rejected Hyperliquid HLP

- URL: https://riadefi.com/rejections/hyperliquid-hlp/
- Exposure: other
- Memo version: v1
- Reviewed: 2026-08-19
- Next review: 2026-09-19

## The memo

REJECTED ON BOTH ELIGIBILITY AND A TWICE-REALIZED MARKET-MECHANIC LOSS. 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 produced 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 validators can alter a market outcome under pressure. A four-day deposit lock further means the client cannot exit as the risk first appears.

## What would reopen the file

- 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

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Published by Ketju Research (https://ketjuresearch.com). Educational analysis only; not legal, tax, compliance, or investment advice.
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