Home CryptocurrencyAltcoin Hacker Mango Markets is allegedly faking a short Curve attack to exploit Aave

Hacker Mango Markets is allegedly faking a short Curve attack to exploit Aave

by SuperiorInvest

As analysts at Lookonchain described on November 22nd, the tokens of decentralized exchange Curve Finance (CRV) appear to have suffered a major short-seller attack. According to Lookonchain, ponzishorter.eth, the address associated with Mango Markets exploiter Avraham Eisenberg first traded 40 million USD Coin (USDC) to the decentralized financial protocol Aave on November 13 to borrow CRVs to sell.

This act reportedly caused the CRV price to drop from $0.625 to $0.464 during the week. Fast forward to today, blockchain data shows that ponzishorter.eth borrowed an additional 30 million CRV ($14.85 million) through two transactions and transferred it to OKEx for sale. The team at Lookonchain speculated that the trade was done to lower the price of the token “so many people who used CRV as collateral will face liquidation.”

In response to the heavy selling activity, a wallet associated with the Curve founder added an additional 20 million CRV in collateral. On Aave, the health factor of wallet addresses was 1.65 at the time of publication, indicating an excess of hedging against borrowed assets.

But like he said from blockchain analytics firm Arkham, the deals “may simply be bait,” with Aave instead being the primary target. Arkham alleges that Eisenberg built up a position of over $100 million on Aave for a sophisticated business scheme.

First, it involves dispersing the lack of CRV tokens on Aave, which is illiquid on the platform but also has very low margin requirements, both of which are important factors for the exploit. The ensuing attention would prompt users to buy in droves on the dip to defend the CRV price, and for others, try to push out the short-seller to cover their losing position.

However, the real conspiracy seems to be using the possibility that Aave cannot cover short Eisenberg CRV positions because the platform allegedly does not have enough liquidity to buy back more than 20% of the short. This would then favor bets against Aave and a drop in the price of its native token:

“The real target here was AAVE’s vulnerable looping system, which Avi mentioned last month. Using $40 million to loan almost $50 million to CRV could leave AAVE in serious bad debt.”

“To liquidate Avi’s position, Aave’s liquidators will have no way to buy back all the CRVs he has borrowed. AAVE will have to sell a significant amount of security module tokens to cover this loss,” Arkham wrote. A screenshot of the swap offer provided by the firm shows an 89.8% potential swap impact between USDT and CRV for an estimated $100M position.

At press time, CRV has risen 15.47% to $0.5742 in the last 24 hours, while Aave has fallen 6.33% to $53.54 over the same period. On October 11, Eisenberg withdrew $117 million from the Mango Markets protocol, having previously kept $47 million as a bug bounty. return the resthe called it a “highly profitable business strategy.”

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