Mango Markets Exploit Plot Revealed

A self-described “digital art dealer” claiming to be part of a group that siphoned $112 million from Mango Markets last week has come forward to defend the group’s actions.

In a statement on Twitter, Avraham Eisenberg said the group used the protocol “as designed,” believing their actions to be legal. The development team failed to anticipate the consequences of the protocol’s parameters, he said.

The attack rocked the Solana-based trading platform on Tuesday, sending the price of its native token, MNGO to roughly $0.02, down around 50% on the day, and off 95% from an all-time peak of $0.50 set in September 2021. 

The wallet receiving funds drained from the protocol had proposed via a DAO community vote on Saturday to return a portion of the proceeds less a substantial bounty, if the community promised not to pursue legal action. That proposal was soundly defeated.

Mango’s developers tweeted they are now in the process of recouping $67 million in various cryptoassets and said the team has started working on an algorithm to decide on a refund split.

Loading Tweet..

Eisenberg was initially linked to the wallet address that carried out the exploit via an ENS domain name ponzishorter.eth and anonymous Discord chat messages published by Chris Brunet that indicated the moniker was used by Eisenberg. The chat logs also showed Eisenberg discussing the precise mechanism of the exploit in advance.

Was the Mango Markets exploit a crime?

Since the attack, a debate has raged on crypto Twitter as to whether those responsible could be subject to civil or even criminal liability.

According to Doug Colkitt, founder of the Crocswap decentralized exchange, the group’s actions don’t rise to the level of “computer fraud.”

Loading Tweet..

Despite the significant funds removed from the protocol, legal prosecution is unlikely, according to Ian Corp, an attorney at law firm Agentis.

“It’s possible that the SEC and/or CFTC bring civil charges against them,” Corp told Blockworks via email, “but they would have to also prove that the Mango token was either a security or commodity.”

So far, there are few precedents for prosecuting this type of DeFi market manipulation.

“Celsius and Three Arrows engaged in obvious market manipulation and no government agency have come forward to punish them accordingly,” Corp said.

Blockworks Research analyst Dan Smith also drew a distinction between the facts in this case compared to other exploits.

“The exploiter only used open market operations to pull this off. No code was changed, no new code was deployed, and he did not have to manipulate anyone else into acting on his behalf,” Smith said. 

But the case bears some similarities to the exploit that took down Indexed Finance in December 2021. Founders of the protocol identified the attacker, and their resulting lawsuit is pending in Canadian courts.

A further proposal to deal with the DAO’s bad debt passed a community vote and is expected to be discussed on Mango’s Discord on Monday.

Macauley Peterson contributed reporting.

---

Get the news in your inbox. Explore Blockworks newsletters:

• Blockworks Daily: The newsletter that helps thousands of investors understand crypto and the markets, by Byron Gilliam.
• Empire: Start your day with top crypto insights from David Canellis and Katherine Ross.
• Forward Guidance: Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin.
• 0xResearch: Get alpha directly in your inbox — market highlights, charts, degen trade ideas, governance updates, and more.
• Lightspeed: All things Solana, in your inbox, every day from Jack Kubinec and Jeff Albus.
• The Drop: The newsletter for crypto collectors and traders, covering games, tokens, apps, memes and more.