Experts aren't convinced by Mango Markets' exploiter's legality despite claims

By: Mark Jessy

Experts aren't convinced by Mango Markets' exploiter's legality despite claims

October 18, 2022 5:59 AM

A crypto lawyer thinks the users' purported agreement not to pursue legal action against Mango Markets exploiter Avraham Eisenberg isn't ironclad.


The $117 million Mango Markets exploiter insists that their actions were 'legal,' but a lawyer says the company could still face consequences.


On Oct. 15, self-described digital art dealer Avraham Eisenberg tweeted that he and his team had exploited the system by engaging in "legal open market actions, using the protocol as designed," claiming that they had made "huge profits" from their endeavors.



On October 11th, Eisenberg and his team conducted an exploit in which they artificially increased the value of the collateral they had posted, the platform's native token MNGO, and then borrowed heavily against this inflated collateral, depleting Mango's funds.


According to Michael Bacina, a partner at the Australian law firm PiperAlderman, "if this had occurred in a regulated financial market, it would likely be seen as market manipulation."


"Price manipulation is related to misrepresentation, and it's illegal and gives rise to legal claims in many jurisdictions where such behavior is common."


Eisenberg has agreed to "make all users whole," and after discussions with the Mango DAO, the DAO voted to let him keep $47 million as a "bug bounty." "as the remaining amount is returned to the Treasury.


The proposal includes a stipulation that states those who hold MNGO tokens "will not pursue any criminal investigations or freezing of funds" now that Eisenburg has returned the agreed upon portion of the exploited cryptocurrency.


Bacina, on the other hand, claims it's "unlikely" that Eisenburg will be exonerated of all responsibility, not even by those who voted in favor of the proposal, because the proposal's language is "weak." "commenting:


"The proposal is poorly worded, and the circumstances raise doubts about whether or not a release will be offered."


However, given that the member's legal claims would be reduced by the amount the member received as a result of the proposal, Bacina speculated that there might be a "limited commercial incentive" to sue Eisenburg.


Related Mango Markets exploited for $100M after price data manipulation


He explained that many members may not have commercial incentive to sue Mr. Eisenberg because, "assuming claims survive the proposal," any claims would still need to be reduced by any amounts which had been received by a member as a result of the proposal.


The DAO approved a plan to reimburse affected users using some of the $67 million in cryptocurrency that was returned to the platform.


Eisenberg argues that his return of exploited cryptocurrency is analogous to automatic deleveraging on cryptocurrency exchanges, in which the exchange takes a cut of the profits from successful traders to offset losses.