Trove Markets Faces Scrutiny Over $10 Million HYPE Token Dump and ICO Controversy

Trove Markets is under investigation after allegedly dumping $10 million in $HYPE tokens in a 24-hour period. The project, built on Hyperliquid's HIP-3 protocol, raised $20 million through an ICO to secure 500,000 tokens for deployment according to reports.

On-chain data from wallet 0xebe07e526c4dc5f0005801bbd7d9850c424cf719 shows the sales started with a small transaction of $160,000 before escalating to $10 million. The activity raised questions about insider manipulation and compromised wallet access.

The founder of Trove Markets publicly denied control over the wallet, asking for its closure. However, sales continued minutes after the statement, intensifying speculation about potential fraud.

Why Did This Happen?

Trove Markets raised $11.9 million in its ICO, but the event was extended at the last minute, causing confusion and reportedly leading to a $73,000 loss for a Polymarket trader. The team later announced an independent review of the token sale and distribution.

The project also faced backlash for allegedly hiring influencers to promote the token without disclosing team members' Iranian origins. Additionally, it invested in the controversial XMR1 project while delaying staking HYPE tokens as required by the HIP-3 protocol.

The Hyperliquid Foundation donated 10,000 $HYPE tokens (worth approximately $254,000) to investigator ZachXBT to probe the token sales. Known for tracking crypto fraud, ZachXBT is expected to clarify whether the sales were intentional or a result of mismanagement.

How Did the Community and Market React?

Community members, including NMTD8, expressed concern over the staking delays and potential misuse of funds. The HYPE token has since fallen approximately 60% below its ICO price, leaving early investors exposed.

Trove Markets also faced criticism for undisclosed influencer ads and shifting the token launch from Hyperliquid to Solana. This pivot was announced just before the TGE and attributed to the loss of a liquidity partner who had supported the Hyperliquid-based deployment.

What Are Analysts Watching Next?

Analysts are monitoring whether Trove Markets will meet the staking requirements under HIP-3. Failing to do so could prevent the DEX launch and leave investors without recourse.

Investors are also watching the results of the Hyperliquid Foundation's investigation and Trove Markets' planned independent review of the ICO. These efforts could either restore trust or further damage the project's reputation.

The broader market is keeping an eye on Hyperliquid's HYPE token price. HYPE has rebounded slightly to trade above $26.00, supported by growing staking activity and derivatives market interest. However, on-chain metrics suggest the token remains in a bearish trend.

Trove Markets has not yet responded to requests for comment. The incident highlights the risks associated with DeFi projects involving large token allocations, permissionless protocols, and limited transparency.