China Cracks Crypto Laundering Cases through HyperLiquid

• Chinese police busted 3 crypto laundering cases using HyperLiquid since March 2025.
• Criminals used HyperLiquid losses to hide money, then made profits on other exchanges.
• The scam mirrors the style of James Wynn, causing worries about platform safety.

In a startling revelation, Salus founder Mirror Tang disclosed that Chinese law enforcement has uncovered three separate crypto laundering operations exploiting HyperLiquid’s trading mechanisms since March 2025. The disclosure sheds light on a new and complex tactic being used by scammers to remove illicit funds through decentralized finance platforms.

According to Tang, the miscreants used HyperLiquid’s high-leverage liquidation engine as a tool to create artificial trading losses and cause intentional losses on HYPE. Simultaneously, they made opposite trades on CEXs and earned equal profits. This crafty method covered up the actual source of the funds by showing losses on the blockchain, while the real profits were made off-chain, giving the miscreants a perfect exit. 

Another major revelation is that the strategy used by the fraudsters mirrors the idea of James Wynn. While Wynn is not named as being directly involved, the method bears an uncanny resemblance to his methods. Following the revelation, Tang warned Hyperliquid contributors about the lack of adequate risk controls in the platform. Further, he emphasized that if risk control measures are not resolved, the platform could face a high risk of regulatory intervention. 

Related: Hyperliquid Token Hits $36 After CFTC Talks Spark Rally

This revelation comes amid broader concerns about the vulnerability of decentralized exchanges (DEXs) to money laundering, especially when they operate without KYC, AML, or surveillance tooling. The blending of DeFi platforms like HyperLiquid with centralized exchanges creates a layered structure that can be easily exploited if not properly monitored. As DeFi continues to scale, the revelation serves as a wake-up call, not just for HYPE but for the entire ecosystem.

The post China Cracks Crypto Laundering Cases through HyperLiquid appeared first on Cryptotale.