Similar to James Wynn’s strategy, it attracted attention
Tang, founder of blockchain security firm Salus, said Chinese authorities have found three separate cases of cryptocurrency-based money laundering that allegedly utilized a decentralized trading platform hyper-flow. The operation, first detected in March, demonstrates a novel and complex strategy that leverages hyperliquid high-risk liquidation mechanisms to mask illicit gains.
According to Tang, the perpetrators use the hyperliquidity high leverage function to trigger liquidation events that occur in transaction losses. Meanwhile, they place the reverse position on the centralized exchange, allowing them to make profits while also appearing on-chain losses.
“This dual market strategy effectively obscures the real process of funds,” Tang explained. “By deliberately causing super liquidity losses, while gaining profits elsewhere, criminals can launder money under radar.”
The washing program is reportedly closely reflecting the method used by James Wynn, who has been charged with manipulating cross-exchange arbitrage opportunities for illegal purposes. Although Wynn has not yet been linked to recent cases, structural similarities in operations raise red flags within the crypto-compliant community.
Experts demand stronger risk control on the Defi platform
The lack of built-in risk control for excessive liquidity has become an increasingly concerned issue. Mirror Tang publicly called on super fluent contributor Jeff (@chameleon_jeff on X) to address these issues, warning that the failure to implement powerful anti-money laundering (AML) measures could lead to scrutiny from regulators.
“Platforms that do not proactively implement AML protection may face regulatory interventions, especially in Chinese jurisdictions that are under rigorous investigations,” Tang said.
As Chinese law enforcement agencies continue to intensify crackdown on illegal crypto activities, including from pyramid schemes to unlicensed token products, now, money laundering is increasingly complex through decentralized protocols.
As the crypto ecosystem matures, experts say both communication and DEFI platforms need to adopt more advanced monitoring tools to detect manipulation and comply with international financial standards.
Hyperliquid has not yet made a formal response to the platform suspected of abuse of its money laundering activities.
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