Mango Markets Exploiter Tried To Exploit Aave Loophole And Failed
Mango Market exploiter Avraham Eisenberg’s attempt to replicate his “highly profitable trading strategy” in the decentralized finance (DeFi) protocol Aave failed, resulting in the loss of millions. According to on-chain analytics company Lookonchain, an address associated with Eisenberg, transferred $40 million (roughly Rs. 325 crore) worth of USD Coin (USDC) to Aave to borrow Curve token (CRV ) for the purpose of scarcity. This resulted in the price of the CRV rising by about 26 percent to $0.464 (approx. Rs. 37.34) from $0.625 (approx. Rs. 51.14) in the previous week.
That said, the move didn’t go entirely as planned as the community rallied behind CRV, buying the DeFi token and causing its value to rise 46 percent in the last 24 hours to $0.71 (roughly Rs. 57 , 63).
CRV war was played #Awe yesterday and concluded that the long time beat the short.
ponzishorter.eth is short $CRV by borrowing and discarding $CRV,$CRV guardians buy $CRVraising the price to $0.72, and liquidating all ponzishorter.eth securities.
– Lookonchain (@lookonchain) November 23, 2022
Blockchain analytics company Arkham Intelligence tweeted that Eisenberg may have tricked people into believing he was shorting CRV to shut down Michael Egorov, the founder of the DeFi network.
According to Arkham Intelligence, Eisenberg’s real intention was AAVE A vulnerable addiction system and its lending could leave the DeFi network in dire straits. The blockchain analytics company added, “In order to eliminate Avi’s position, AAVE traders will have no way to return all the CRV they have borrowed. On the chain, there is no fee to pay more than 20 percent of the position. AAVE will have to sell significant amounts of tokens from the security module to cover this loss.”
In October, Eisenberg explained. that it was possible to manipulate Aave’s lending policies to over-borrow, default, and leave Aave in bad debt.
After the short strategy failed, Aave said the plan to liquidate its CRV pool was successful and went as planned. But it noted that the position was not fully covered as 2.6 million CRVs ($1.6 million or about Rs. 13 crore) remained, representing less than 0.1 percent of the positions in the deal.
2/6 The huge CRV loan that had been building up for the past week was largely wiped out by the protocol closing process. However, the position was not fully covered and 2.64M CRV (≈ $1.6M in current value) remained. This represents <0.1% of the loan amount in the protocol.
– Aave (@AaveAave) October 22, 2022
New governance proposal is now live on Aave which will prevent further price manipulation on the platform.
Meanwhile, the Aave community pointed out that the developers could have done something to prevent this situation since they received several warnings about the possibility before.