NewsFlash Articles Data Fundraising Skill&API

A Harvard Chinese Entrepreneur Conducted a $2.9 Trillion Deal, Wall Street Joins Forces to Sue Him

林晚晚

Read this article in 25 Minutes

The Money Has Not Reached the United States

When you participate in an IPO, at least four entities will take a cut: the brokerage firm, underwriter, custodian bank, and trading platform.

Each of them will take a slice of the pie. This is the common rule for A-shares, US stocks, and Hong Kong stocks, a rule that has remained unchanged for over a hundred years.

On May 13, 2026, two century-old exchanges in Chicago and New York suddenly discovered a trading website that bypassed all these fee collection points.

Based in Singapore, founded by a young Chinese Harvard graduate, with only 11 employees, and serving a global user base. A few days later, the two century-old exchanges in Chicago and New York jointly approached US regulators to request the shutdown of this website.

That night, as the lead underwriters, four top investment banks priced the IPO of AI chip company Cerebras at $185 per share.

Cerebras, positioned against NVIDIA, had the largest tech stock IPO of 2026 so far, raising $5.5 billion, the largest in the US since Uber went public in 2019.

The underwriting fees, ranging from 4% to 7% of the total IPO amount, resulted in the four investment banks sharing approximately $220 million to $380 million in underwriting commissions that night.

This money went into their US accounts, subject to US corporate income tax, used to pay bonuses to US employees, who then pay US individual income tax. Each step is a tax collection point for the US Treasury.

Simultaneously, on a website called Hyperliquid, pre-IPO perpetual contracts for Cerebras were trading, with the contract code $CBRS, going live on May 1.

Pre-IPO perpetual contracts allow you to place orders online speculating on the future stock price of a company that has not yet gone public. Hyperliquid is the platform providing this order placement service.

On May 13, the contract was priced at $291, 57% higher than the $185 jointly set by the four investment banks. The 24-hour trading volume was $230 million.

Hyperliquid charges approximately 0.025% in matching fees, equivalent to $5,750.

This money goes into a blockchain account, not subject to US corporate income tax, without going through any Wall Street intermediary.

Of course, compared to the hundreds of millions split by the four Wall Street investment banks that night, $5,750 is just a drop in the bucket.

But the reason why the leftover amount made headlines is because it pointed to a future that made the U.S. Treasury very uncomfortable: any asset in the world could be traded on-chain 24/7, and the U.S. wouldn't receive a penny in tax.

Two days later, on the afternoon of May 15, 2026, Bloomberg's exclusive arrived.

The Chicago Mercantile Exchange (CME) and the Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange, jointly approached the CFTC (U.S. Commodity Futures Trading Commission) and members of Congress, demanding that Hyperliquid must accept U.S. regulation, mandatory KYC, and mandatory transaction monitoring.

The reasons they gave were "market manipulation" and "sanctions evasion."

In the U.S. financial system, compliance is not the same as "legal." Most of the time, it refers to whether the U.S. can benefit from it.

Hyperliquid did not violate U.S. law, but it did not pay taxes to the U.S.

This may be the reason why CME and ICE brought Hyperliquid to the CFTC.

Hyperliquid Circumvented Taxation Authority

The earliest sign that made CME and ICE feel something was amiss occurred on the weekend of February 28, 2026.

That day, the U.S. and Israel launched a joint airstrike on Iran. Iran is the fourth-largest oil-producing country in OPEC, and the Strait of Hormuz carries one-third of global seaborne oil transport.

But it was a Saturday, and the Chicago CME, London ICE, and Singapore SGX were closed. From Friday afternoon New York time until Sunday evening, oil prices worldwide were frozen.

A week before the war, the daily trading volume of the WTI Crude Oil perpetual contract on Hyperliquid was approximately $21 million. Over the weekend following the outbreak of the war, the daily trading volume of the same contract skyrocketed to $1.7 billion, nearly 250 times.

On March 20, JPMorgan released a research report authored by top analyst Nikolaos Panigirtzoglou. His report on global fund flows sat on the desks of the world's largest hedge funds, sovereign wealth funds, and central banks.

In that report, he used a very understated phrase:

"CME traders could not react at all."

The meaning of this sentence is that a oil price transaction, which was supposed to take place on CME, settle clearing fees, generate commissions, and ultimately become part of the U.S. GDP, was completed on Hyperliquid, leaving nothing in the U.S.

In early May, CFTC Chairman Michael Selig publicly stated at an industry conference that on-chain platforms like Hyperliquid may begin to impact the spot or futures prices of registered platforms.

In the afternoon of May 14, Cerebras rang the bell, opening at $350. The next day, May 15, Bloomberg exclusively reported.

From the launch of HIP-3, to JPMorgan's research report, to Cerebras ringing the bell, to that exclusive Bloomberg article, a total of 214 days. A moat of over a hundred years was torn open by a piece of code in 7 months.

So to understand why U.S. regulators are so concerned about an 11-person company, you first need to see how Hyperliquid bypassed the entire tax system.

Hyperliquid went live in 2023, co-founder Jeff Yan, raised in Palo Alto, from a Chinese immigrant family, mother was a single parent accountant.

In 2012, he won a silver medal at the International Physics Olympiad representing the U.S. and a gold medal the following year, followed by a full scholarship to Harvard. After graduating, he joined Hudson River Trading (a top global quantitative trading firm), and later started his own market-making firm in Puerto Rico, named Chameleon Trading.

After the FTX collapse in 2022, he and an anonymous Harvard classmate began writing a fully on-chain, 24/7, no-entity, code-only trading platform. Then they made a decision opposite to the Silicon Valley script, not raising VC.

Yan publicly rejected VC offers valuing the project at billions of dollars. His reason was:

"If we want to create a truly neutral platform where everyone can build on top, there can't be insiders. VCs taking a lot of tokens would become a scar on the network."

He funded the entire project with the money he made from his trading firm. The team size always remained between 10 and 14 people. In November 2024, Hyperliquid launched the token HYPE, with 31% directly airdropped to early users, one of the largest user allocations in crypto history, without giving a cent to VC.

By the end of 2025, the programs of these 11 individuals held a 70% market share of the on-chain perpetual contract market, with a total annual trading volume in 2025 reaching $2.9 trillion, surpassing the combined volumes of Coinbase International, Crypto.com, and HTX.

Perpetual contracts are a derivative invented by the crypto community, roughly equivalent to "perpetual futures." Traditional futures contracts have a delivery date and must be closed upon expiry. Perpetual contracts, on the other hand, have no expiration date, allowing traders to hold their positions indefinitely, making them suitable for betting on short-term price fluctuations. Hyperliquid is the largest matching platform for such contracts.

However, for traditional finance, these transactions remain internal to the crypto community. CME occasionally glances over, while ICE doesn't pay attention at all.

It wasn't until October 13, 2025, that Hyperliquid launched an upgrade called HIP-3.

The rules of HIP-3 state that anyone can open a new market on this platform and trade anything by pledging approximately $25 million worth of Hyperliquid tokens as collateral. This includes trading in US stocks, bonds, forex, commodities, and even pre-IPO company valuations.

This step transformed the permission to create new markets from "requiring regulatory approval" to "paying the deposit."

Within a few months of HIP-3's launch, over 250 US stock perpetual contracts appeared on-chain, including Tesla, NVIDIA, and Apple. Perpetual contracts synthetically tracking OpenAI and SpaceX valuations followed suit. Hyperliquid obtained on-chain perpetual contracts officially authorized by the S&P 500, followed by the Cerebras Pre-IPO perpetual contract.

The margin for WTI crude oil perpetual contracts is USDC, a stablecoin pegged 1:1 to the US dollar, unrelated to cryptocurrencies. The traders placing orders here are oil price speculation hedge fund traders.

By early 2026, the markets on HIP-3 contributed 30% of Hyperliquid's daily trading volume, with the energy and precious metals sectors accounting for 67%.

This system bypasses far more than just compliance issues. It circumvents the entire tax collection route of the US financial infrastructure.

The dominance of CME has nothing to do with its matching speed. In terms of matching speed, CME is far outperformed by Hyperliquid.

What makes CME the CME is its status. It is an entity registered in the US, reporting to the SEC and CFTC, paying taxes to the IRS, and settling fees to the US Treasury. It is part of the US sovereign financial system.

Hyperliquid has achieved today's scale not just through technology. From a technological perspective, Binance, Coinbase, and CME could all create similar products.

What sets Hyperliquid apart is on-chain settlement, serving a global user base, with its profits completely bypassing the U.S. system.

However, the moat created by this is not so much related to technology but is closely tied to taxing rights.

What CME and ICE Care About

To understand why CME and ICE are so nervous, let's first look at the two names.

CME is the trading platform behind the scenes that you hear about in the news when the prices of oil, corn, or gold futures go up or down. Founded in Chicago, it has a 178-year history and is the world's largest derivatives exchange.

ICE is another century-old institution. It owns the New York Stock Exchange (NYSE) and the London Brent Crude futures market, and almost monopolizes U.S. futures trading in soybeans, cotton, and coffee.

Together, these two basically represent the "pricing power" of the traditional U.S. financial infrastructure.

Looking at their complaint, they accuse Hyperliquid of three things: manipulating oil prices, sanctioned countries using it to evade sanctions, and insider trading. It sounds legitimate.

But then the following facts reveal the true purpose of this complaint.

Even before Bloomberg's report "CME, ICE Drive U.S. Regulatory Crackdown on Crypto Field's New Force in Oil Trading" came out three months ago, on February 19, 2026, CME had already announced that its own crypto futures and options would start trading 24/7 on May 29, with only a 2-hour weekly maintenance window.

On May 14, the same day as Cerebras rang the bell and a day before the Bloomberg report, CME announced that it would launch crypto index futures in partnership with Nasdaq on June 8.

While accusing others of "non-compliant 24/7 trading," CME was preparing for its own 24/7 trading. While claiming that "on-chain markets distort prices," CME itself was getting into tokenization and considering issuing its own tokens.

The story on ICE's side is similar.

In October 2025, ICE announced a $20 billion investment in the prediction market, valuing it at $90 billion. By March 2026, ICE's total investment in the prediction market had reached $16.4 billion.

In the prediction markets, users can bet on the outcome of future events, such as which candidate will win or which stock will rise.

Similar to Hyperliquid, it has circumvented comprehensive CFTC regulation and is known as a "decentralized savage" in the industry.

However, ICE holds $16.4 billion in the prediction market, meaning a significant portion of the platform's future earnings will flow back into the United States through ICE's equity dividends, entering the U.S. tax system.

In March 2026, ICE also invested in OKX (one of the world's largest cryptocurrency exchanges), valuing it at $250 billion. In January 2026, ICE announced the development of on-chain securities infrastructure. The New York Stock Exchange is working on a 24-hour tokenized securities platform.

Cryptocurrency analyst ZachXBT's question on X can be summarized as:

"While ICE is putting $1.6 billion into the prediction market and lobbying to regulate Hyperliquid, why isn't it also concerned about the prediction market?"

Taking all these factors into account, what CME and ICE are opposing is not decentralization, not 24/7 trading, and not on-chain transactions.

They are opposed to transactions that they don't have equity in, that they can't extract intermediary fees from, and that the U.S. Treasury cannot tax.

The prediction market has intermediaries like ICE, a U.S. shareholder, making it compliant. OKX, with ICE's investment, is moving towards compliance.

Hyperliquid has nothing, so it is non-compliant.

The boundary between compliance and non-compliance may not be as straightforward as the three reasons stated in the complaint.

$29 million is not Legal Fees

Hyperliquid most likely knew this day would come.

On February 18, 2026, it donated $29 million to a Washington-based non-profit organization called the Hyperliquid Policy Center. The CEO is Jake Chervinsky, one of Washington's most senior crypto lawyers. The policy advisors are from Sullivan & Cromwell, one of Wall Street's oldest law firms, which provided legal services to Rockefeller and Morgan a century ago.

The Chief Policy Officer has been ranked a top lobbyist by The Hill, the most authoritative policy influence list in the Washington political scene, for four consecutive years.

K Street is a street north of the White House in Washington, D.C., where the largest lobbying firms in the U.S. are located. In the U.S. political context, "K Street" is synonymous with "lobbying group."

Hyperliquid has hired the most expensive person on this street.

On the same day that the Bloomberg article was published on May 15, Jeff Yan himself had already met with Washington policymakers.

While the $29 million in the account is labeled as legal services and policy consulting fees, when viewed in the context of the fund flow, it looks more like a down payment on the ransom that Hyperliquid paid for itself.

Hyperliquid is proactively converting a portion of its profits into a form accessible within the U.S. system. Attorney fees will be used by Sullivan & Cromwell partners to pay U.S. income tax.

Compliance costs will turn into salaries for a group of Washington advisors and lawyers, who will also pay U.S. income tax. Future potential CFTC registration fees will go directly to the U.S. Treasury Department. Future potential fines as well.

Jake Chervinsky's title states Legal Counsel, but his actual function is the payee. Sullivan & Cromwell's title states law firm, but its actual function is the conduit. Those lobbyists on K Street may be called policy advisors, but their actual function is intermediary.

This is the inevitable path for every native crypto project transitioning from "wild west" to "compliance."

Coinbase has gone through this process, being sued, investigated, fined by the SEC, and finally listed on the NYSE, becoming a compliant company. Binance has gone through this process, reaching a $4.3 billion settlement in 2023 with the U.S. Department of Justice, CFTC, and Treasury, with founder Changpeng Zhao pleading guilty and Binance still operating to this day. Kraken has gone through it, Ripple has gone through it.

Their commonality is that, after being penalized enough, they transformed into "compliant" companies.

Another implication of "compliance" is that every one of their transactions now flows through the U.S. system. Commissions are taxed, employees pay taxes, shareholders' earnings are taxed. The time when they slipped under the U.S. Treasury's nose is essentially over.

Hyperliquid's $29 million is just the beginning.

If the CFTC eventually forces it to register, it will face two options.

The first option is to accept registration, become a compliant company, lose its existing global anonymous user base, and become another Coinbase.

The second option is to refuse registration, be blocked by the United States' IP, have the USDC channels cut off, have the founder sued, and become another BitMEX that is tamed or eliminated (a cryptocurrency exchange platform in 2020 sued by the U.S. Department of Justice for non-compliance, with the founder eventually pleading guilty).

There may be other possibilities between these two options, but it is difficult to imagine which one would allow Hyperliquid to continue its current business. That is, the $5.75 million matching fee that can completely bypass the U.S. Treasury's business.

The path of using code to circumvent regulation may be becoming increasingly difficult.

A large enough on-chain market will sooner or later face a choice: either find a way to share some profits with the U.S. Treasury, or endure the cost of being expelled from the U.S. market.