Mango Hacker Reveals Himself |
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Last week, we ran a story on the $112 million Mango Markets exploit, the 13th largest hack of all time.
Now, there is new info that warrants a follow-up.
A Highly Profitable Trading “Strategy"
In most crypto hacks and exploits, the identity of the exploiter(s) is never revealed.
This time, not only was the exploiter’s identity revealed, but he unmasked himself.
The hacker is self-described digital arts dealer Avraham Eisenberg. In his reveal thread, Eisenberg claims that the drainage of Mango was not an illegal exploit but a fully legal “highly profitable trading strategy.”
We can’t say he’s wrong in saying his actions were highly profitable, but was it legal?
It’s a tricky question, but the answer is probably yes.
As we covered last week, the attack was an act of market manipulation, not a computer hack. Eisenberg believes this clears him of any wrongdoing because he didn’t do anything that the protocol didn’t already allow.
But that’s not where his real protection comes from...
His real saving grace is that, at worst, he committed securities fraud, not computer fraud.
Securities fraud is notoriously difficult to prosecute. Even though the SEC could bring a civil case against Eisenberg, they would have to prove that Mango was a security. As we have seen with the Ripple lawsuit, that is not the easiest task.
Connect the dots, and the likely conclusion for Eisenberg is a mountain of cash and some bad karma (although he did recently return $67 million of the loot to make users whole).
A Gray Area
Regardless of its legality, people obviously aren’t too pleased with Eisenberg and his highly-profitable trading strategy. They argue that actions like Eisenberg’s are classless and represent the worst of crypto.
But do they really?
Would it have been better for Eisenberg to alert the Mango team of its vulnerability instead of taking advantage of it? Yes. But at the same time, the team was already warned of an attack like this back in March. Who’s to say that they would have listened this time?
Although it’s done brutally, actions like Eisenberg’s do serve to strengthen crypto in the long run. Nobody wants to get drained by an exploit, and you can bet that other projects are ensuring they can’t be attacked similarly to Mango. Eisenberg himself is suggesting ways to make lending protocols more robust.
Attacks like these might just be a “get hurt now to shine later” situation.
If that is true, then perhaps crypto will fondly look back on this record-breaking year of exploits.
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Aptos Stumbles Out The Gate |
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In a previous edition of CoinSnacks, we covered the new layer-1 blockchain Aptos and its arguable scary amount of venture capital funding.
As a quick refresher, Aptos is run by the developers of the failed Meta blockchain project, Diem. Like Diem, Aptos’ main selling point is its use of the Move programming language, which in theory, enables performance far beyond the dominant smart contract language, Solidity.
In that story, we told you to cautiously keep an eye on it. Cautiously, because it is still a very new and unproven project. But, keep an eye on it because of its $350 million VC-funded war chest.
With the official launch of Aptos on Monday, it’s the perfect time to re-assess where we stand on the ambitious L1.
Concerning Signs
Unfortunately, Aptos has stumbled out of the gates.
To start, the blockchain’s most important feature – the game-changing 160,000 transactions per second (TPS) throughput – is currently only doing 4 TPS. To show how bad that is, Ethereum, the non-scalable blockchain Aptos is built to replace, is currently handling 13 TPS.
Making matters worse, most of these ‘transactions’ are just validators communicating with each other and sending metadata back and forth. Actual users are having difficulty accessing the blockchain, and the team in the Aptos discord has not provided any relief.
The most concerning component of the Aptos launch, however, is the shady tokenomics. Leading up to and immediately following the launch, there was no publicly available info on Aptos’s tokenomics. Once the tokenomics were finally released, it became clear that a large percentage of tokens are held by insiders, as over 80% of the total token supply is already staked, even though there was no method for the public to obtain tokens.
Not great.
Our Take
If we told you that you could invest in a blockchain handling fewer transactions than promised, is not usable for the average user, is censoring Discord channels, has a token that is 80% held by insiders, and is being listed by major exchanges before tokenomic details are released, would you do it?
Of course not.
We’ve seen this story over and over again. As investors, it’s important to assess reality, rather than hype, when looking at new opportunities.
In crypto, the next big opportunity is always on the horizon. Don’t get greedy and try to chase Aptos.
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One thing J-Pow can't print? More Picassos. |
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Texas Investigating FTX Over Yield-Bearing Accounts |
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FTX and its kingpin CEO Sam Bankman-Fried (SBF) have found themselves in hot water with regulators… only this time, it’s not from the usual suspect, the SEC.
Instead, it’s regulators from the home of the extremely average Dallas Cowboys – Texas.
Let’s break down what’s happening.
The Investigation
The story begins with FTX’s buyout of Voyager. Unfortunately, what was a great win for FTX was also the thing that caught the Texas regulators’ attention, as they were already knee-deep into investigating Voyager.
The regulators’ issue with Voyager and now FTX is over yield-bearing accounts. These accounts reward depositors with earnings similar to interest in a savings account.
Regulators don't like yield-bearing accounts because they: "...appear to be an investment contract, evidence of indebtedness and note, and as such appears to be regulated as a security in Texas.” Basically, Texas is accusing FTX of offering unregistered securities, and as part of this accusation, they are attempting to block the Voyager sale until the investigation is concluded.
Deja Vu
These concerns over yield-bearing accounts are nothing new. Earlier this year, for example, BlockFi ate $100 million in fines just to get the SEC off its back. That money sure would have been helpful over the summer when they were desperately trying to avoid going under, but we digress.
FTX isn’t in any danger of going under, but you can bet the farm they don’t want to pay a similar fine. We expect them to settle with the regulators, which is apparently what they are currently attempting to do.
We are more concerned about the yield-bearing accounts becoming collateral damage. In the BlockFi settlement, the company agreed to not offer yield-bearing accounts to US customers. If FTX does the same, then that’s one less option for people in the US to earn a decent yield, and it’ll only be a matter of time until the regulators come for all exchanges that offer yield-bearing products.
In a time of crippling inflation and a weak economy, people need more earning options, not less. Hopefully, the powers-to-be recognize this and cut FTX and its peers some slack.
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