The exploiter of $117million Mango Markets has defended their actions were ‘legal’, but a lawyer suggests they could still face consequences.
Avraham Eisenberg, a self-proclaimed digital art dealer, posed as the exploiter in a series of tweets on Oct. 15, saying he and a team had embarked on a “highly profitable business strategy” and that it was ” market-opening legal actions, using the protocol as designed.”
I believe that all of our actions were legal open market actions, using the protocol as it was designed, even though the development team did not fully anticipate all the consequences of setting parameters such as they are.
— Avraham Eisenberg (@avi_eisen) October 15, 2022
The Oct. 11 exploit allowed Eisenberg and his team to manipulate the value of their posted collateral – the platforms’ native MNGO token – into higher prices and then take out large loans against their inflated collateral that has emptied Mango’s treasury.
Michael Bacina, a partner at Australian law firm PiperAlderman, told Cointelegraph “if this had happened in a regulated financial market, it would likely be considered market manipulation.”
“Price manipulation is a cousin of misrepresentation, and in many jurisdictions engaging in misleading and misleading conduct is illegal and grounds for legal claim.”
Eisenberg has pledged to “make all users whole” and negotiations between him and Mango’s Decentralized Autonomous Organization (DAO) culminated in the DAO’s vote that Eisenberg will be allowed to keep $47 million as ” bug bounty’, while the rest will be sent back to the treasury.
A stipulation as part of the proposal states that MNGO token holders “will not pursue any criminal investigation or freeze funds” as Eisenburg returned the agreed portion of the mined cryptocurrency.
However, Bacina said it was “unlikely” that Eisenburg would be released from liability, even those who voted for 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.”
That being said, Bacina said there may be a “limited business incentive” to sue Eisenburg, as any legal claim would be reduced by the amount a member would have received as a result of the proposal.
“Assuming the claims survive the proposal, any claim should still be reduced by any amount received by a member as a result of the proposal, which may mean that many members have limited business incentive to sue Mr. Eisenberg” , he explained.
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A portion of the $67 million in crypto returned to the platform will now be used to reimburse affected users as part of the refund to plan DAO approved.
Eisenberg argues that the mined crypto he returned is similar to automatic deleveraging on cryptocurrency exchanges where a portion of profitable traders’ profits are clawed back to cover the exchange’s losses.
Cointelegraph contacted Eisenberg for comment but did not immediately receive a response.