The Mango Markets exploiterwith a value of USD 117 million, has defended his actions were “legal”, but a lawyer suggests he could still face consequences.
The self-styled digital art trader Avraham Eisenberg revealed himself as the exploiter in a series of tweets on October 15, claiming that he and a team undertook a “highly profitable trading strategy” and that it was “legal open market action, using the protocol as designed.”.
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.
— Avraham Eisenberg (@avi_eisen) October 15, 2022
I believe all of our actions were open market legal actions, using the protocol as designed, even if the development team did not fully anticipate all the consequences of setting the parameters the way they do.
The October 11 exploit worked because Eisenberg and his team manipulated the value of their posted collateral – the native token of the MNGO platforms – into higher prices, and then took significant loans against their inflated collateral, draining Mango’s treasury..
michael bacinaa partner in the Australian law firm PiperAlderman, he told Cointelegraph that “if this had happened in a regulated financial market, it would probably be seen as market manipulation”.
“Price manipulation is a cousin of misrepresentation, and in many jurisdictions engaging in deceptive and misleading conduct is illegal and the subject of legal claims.”
Eisenberg has pledged to “compensate all users,” and negotiations between him and Mango’s decentralized autonomous organization (DAO) have resulted in the DAO voting that Eisenberg can keep $47 million as a “bug bounty.”and the rest will be returned to the treasury.
A stipulation that is part of the proposal states that DAO token holders “shall not conduct any criminal investigation or freeze funds.”as Eisenburg has returned the agreed portion of the mined cryptocurrency.
NeverthelessBacina said it is “unlikely” that Eisenburg will be cleared of all responsibility, even from those who voted in favor of the proposal, given that the wording of the proposal is “weak”commenting:
“The wording of the proposal is weak and the circumstances are such that the offer of a release is questionable.”
Having said that, Bacina said there could be “limited business incentive” to sue Eisenburg, as any legal claim would be reduced by the amount a member received because of the proposal..
“Assuming the claims survive the proposal, any claim would have to be reduced by whatever amount a member would have received as a result of the proposal, which may mean that many members have limited business incentive to sue Mr. Eisenberg,” he explained..
A portion of the $67 million in crypto returned to the platform will now be used to reimburse affected users. according to the reimbursement plan approved by the DAO.
Eisenberg maintains that the mined cryptocurrencies he returned are similar to automatic deleveraging on crypto exchanges.where a portion of profitable traders’ profits is recovered to cover the exchange’s losses.
Cointelegraph reached out to Eisenberg for comment, but did not immediately receive a response.
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