No doubt, exploits in the crypto industry have been on the rise, with attackers becoming more inventive in their approaches. And a pretty penny has been lost through this in time past.
The Mango Markets’ recent exploit is definitely one to talk about.
Avraham Eisenberg, a self-acclaimed “digital dealer,” reported himself and his team to be responsible for this attack on the Mango Markets. The hacker exploited the Solana-based platform of about $114 million through organized manipulation. However, he has proclaimed their actions legal via a series of tweets dated Oct 15, 2022.
In one of his tweets, he said:
“I believe all of our actions were legal open market actions, using the protocol as designed, even if the development team did not fully anticipate all the consequences of setting parameters the way they are.”
In another tweet, he described the “exploits” on the platform as “a highly profitable trading strategy”. However, it is believed that Avraham has participated in similar attacks in the past, according to this post — where he’s accused of defrauding FortressDAO investor of $14 million.
The Defi Platform Reached an Agreement With Avraham Via a Community Vote
A crypto lawyer thinks these hackers could be made to face the consequences of their actions. However, users of the platform reportedly agreed not to prosecute their actions following the community vote scheduled by the platform.
Based on their agreement, Avraham and his team are to retain $47 million and return $67 million to the exchange. Mango Markets said:
“$67M in various crypto assets have been returned to the DAO. Let’s meet up on Monday 3 PM UTC on the Mango discord to discuss, how we can sort out this mess.”
Although nothing was said about how and when the refunds will be distributed, they did say there would be “multiple DAO votes” the following week.
Another outcome of the votes is the refunded amount would be aimed at the recapitulation of the exchange to cater for its negative balance.
Was the Mango Exploit Really Against the Law?
Let’s reiterate that a legal trading strategy was used to execute the exploit on the Defi platform. Avraham and his team funded the exchange with $10 million. They then manipulated the protocol to inflate the Mango token price to $0.9 from $0.3.
This inflation subsequently boosted the hacker’s collateral, and he could borrow more funds from the platform, then drained it of $114 million.
Ever since the attack, a debate has ensued on Crypto Twitter as to whether legal action against the attacker is necessary or not.
The founder of Crocswap decentralized exchange stated that:
“IMO settling with the Mango exploiter was the correct move. It’s very unlikely the exploiter would have been criminally prosecuted, even if they were doxxed.”
He further buttressed his opinion by saying:
“To understand why, it’s important to distinguish ‘computer fraud’ from ‘securities fraud’.”
An attorney at Agentis, Ian Corp, also does not think a legal prosecution is likely unless SEC can classify Mango tokens as either a “security” or “commodity”.