A $12M Dessert 💸

Hi! In today’s edition:

• 👎 Hyperliquid boots Jelly

• 📜 Bye-bye, IRS DeFi broker rule 

• 🧑‍🔬 Ethereum Pectra finalizes on testnet

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Hyperliquid Delists JELLY Perps After Toxic Short Leads to $12M Loss

Decentralized exchange Hyperliquid has delisted perpetual contracts for Solana memecoin JELLYJELLY following a whale manipulation incident that caused substantial losses to its Hyperliquidity Provider (HLP) vault.

Onchain analytics firm Lookonchain estimates that HLP lost around $12 million over a 24-hour period. 

The whale opened a massive $5 million short position on the low-liquidity memecoin while simultaneously buying it on the spot market and pushing its price higher.

By doing that, the whale triggered their own liquidation, leaving HLP to inherit the toxic short position. The short squeeze was exacerbated by other whales and retail traders spot buying JELLY to lower the vault’s liquidation point.

At one point, Hyperliquid’s vault appeared to be in genuine danger of liquidation and, incidentally, it was at around that time that centralized exchanges Binance and OKX decided to list perpetual futures for JELLYJELLY.

Their involvement led to speculation that the incident was some sort of coordinated attack against Hyperliquid, which has become a growing threat to centralized exchanges such as Binance.

Pseudonymous blockchain sleuth ZachXBT said the whale wallets that had initially manipulated JELLYJELLY were freshly funded via Binance on Arbitrum.

Before the HLP vault was completely liquidated, Hyperliquid validators convened and voted to delist JELLY perpetual contracts, effectively taking the loss but ending up with a profit and loss account of $700,000 in USDC.

Hyperliquid said there had been “evidence of suspicious market activity,” and that users would be made whole by the Hyper Foundation in the coming days.

Nevertheless, the speed with which the validator vote was concluded raised questions about the protocol’s decentralization. 

Responding to former BitMEX CEO Arthur Hayes, who was among those harboring suspicions, one Hyperliquid user said: “Arthur, with all due respect, HL did what is exactly written in their docs — autodeleveraging.”

“A request was sent to all validators to vote on the JELLY delisting price,” they said. “That's how the $0.0095 price was selected to settle all open JELLY positions when they delisted JELLY.”

According to one Hyperliquid validator node runner, the quorum was reached within two minutes.

U.S. Senate Votes to Repeal IRS DeFi Broker Rule

The resolution to kill the controversial Internal Revenue Service DeFi broker rule has successfully passed through both houses of the U.S. Congress and is now heading to President Donald Trump's desk for signing.

The Senate voted 70-28 to pass a motion repealing the IRS DeFi broker rule on Wednesday. The vote followed an earlier approval by the House of Representatives, which passed a resolution to abolish it with a bipartisan majority of 292-132.

The rule, which was finalized by the IRS in December 2023 during the Biden administration, aimed to broaden tax reporting obligations by redefining the term "broker" to include digital asset platforms such as DeFi front-end interfaces.

“We look forward to taking this harmful rule off the books for good,” Blockchain Association CEO Kristin Smith said in a statement. 

Ethereum’s Pectra Upgrade Finalizes on Hoodi Testnet

Ethereum's final Pectra upgrade test was deployed on the Hoodi testnet on Thursday, finalizing on the test network an hour after the hard fork went live.

The Pectra upgrade, Ethereum's most significant change in more than a year, aims to enhance the user experience and developer capabilities. 

The Hoodi testnet was created specifically for Thursday’s final test, and has been closely watched by developers and the broader crypto community as it represents the culmination of efforts to address previous issues and ensure a smooth transition to the upgraded network. 

If the test proves successful, the Pectra upgrade is expected to be monitored for around 30 days before activation on Ethereum's mainnet.

Mantle is building the largest sustainable hub for on-chain finance. Launching three new core innovation pillars: Enhanced Index Fund, Mantle Banking and MantleX. 

• 🌪️ A coalition of 34 crypto firms and advocacy groups has urged the U.S. Congress to challenge the Justice Department’s broad interpretation of money-transmitting laws used to prosecute Tornado Cash developers, warning it could criminalize blockchain software development.

• 🧑‍⚖️ U.S. Securities and Exchange Commissioner Hester Peirce on Wednesday advocated for clearer, more durable crypto regulations through rulemaking and legislation to provide long-term guidance beyond changing administrations.

• 🏦 U.S. Senator Kirsten Gillibrand argued on Wednesday that stablecoin issuers should be barred from offering interest-bearing products to protect traditional banks and their role in providing essential financial services, while also advocating comprehensive regulation.

• 📉 Bitcoin mining stocks fell by as much as 12% on Wednesday after reports that Microsoft is scaling back new artificial intelligence data center investments due to oversupply concerns, highlighting miners’ growing reliance on AI-related revenues.

• 👮 Binance executive Tigran Gambaryan, detained in Nigeria for eight months on disputed charges, on Wednesday described his ordeal as a politically motivated hostage situation and credited international pressure for prompting his eventual release.

• 🧑‍💻 Celo has officially transitioned from a standalone layer 1 blockchain to an Ethereum layer 2 network using Optimism’s technology, enhancing scalability, security, and liquidity while preserving its chain history.

• 🔍 PureFi has launched a zero-knowledge-proof-based know-your-customer and anti-money laundering integration for Uniswap, aiming to enhance DeFi compliance and privacy by embedding verification directly into smart contracts.

• 🪙 Wyoming plans to launch a state-issued stablecoin by July, partnering with interoperability protocol LayerZero, as part of its broader push to lead in blockchain innovation and government transparency.

• 🤑 Rumble, a YouTube alternative, has launched a wallet supporting Tether’s USDT for content creator monetization following major investments from Tether and the deepening of its ties to U.S. elites, including partnerships with Trump Media. 

• 💰 Tether Holdings is investing €10 million ($10.7 million) for a 30% stake in Italian media firm Be Water, continuing its aggressive expansion into diverse sectors beyond cryptocurrency.

• 🎯 GameStop plans to sell $1.3 billion of convertible bonds bearing no interest to fund Bitcoin purchases, adopting a strategy popularized by Michael Saylor’s Strategy (formerly MicroStrategy), as it seeks to diversify amid declining core business and mixed investor sentiment.

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