Mango Markets' Controversial Token Buyback Passes Amid Accusations of Insider Trading
Summary:
Mango Markets, a decentralized finance protocol organization, stirred controversy over plans to buy back tokens above market price, leading to accusations of the proposal benefiting a mysterious account holder who had acquired many tokens just before the announcement. After heated discussions in the community and revisions to the original proposal, the buyback plan was approved. The episode was marked by intense debates over the ethics and potential profits of the buyback. Meanwhile, Avrham Eisenberg, associated with the Mango Markets exploit, was found guilty of fraud.
On the 7th of April, Mango Markets, a decentralized finance protocol organization, stirred up a controversy over its plans to buy back tokens at a cost above market price. A section of the community claimed that the buyback would only benefit the purchaser of MNGO tokens, acquired from FTX estate just days before the proposal was made. This sparked speculation of a possible over-the-counter business deal. The proposal, put forward by DonDuala, led to him being accused of being in cahoots with the FTX purchaser, an accusation he didn't address in the Discord forum. While there were detractors, some community members gave the plan a thumbs up, arguing that it would make sense for the organization to buy MNGO tokens, even if it meant the shadowy FTX estate buyer stood to gain. This group maintained that the MNGO token was undervalued in the market and purchasing it was a route to profit-sharing for investors. After some modifications, the buyback plan saw a green light on April 24. Mango Markets, a Web3 application, runs on the Solana network and is under the custody of MNGO token-holders who collectively form Mango DAO, its governing body. In October 2022, the protocol faced exploitation via a flash loan attack for a hefty sum of $116 million; its token price plummeted by more than 25% compared to its value before the exploit, according to CoinMarketCap reports.
On the fateful day of April 7, DonDuala suggested to Mango DAO that the organization should buy back about 275 million MNGO tokens from their current holders, reducing the circulating supply in the process. The proposed price was $0.032 per MNGO token, significantly more than the market price at the time, which was $0.02324. Special options tokens would be issued by the DAO for this exchange, but their distribution would be limited to the accounts involved in voting for the proposal.
Shortly after DonDuala’s buyback proposal, a mysterious account was discovered, which had recently received MNGO tokens from FTX and was using them to support the buyback proposal. Critics claimed this was a shady practice and suggested that the account holder had conspired with the FTX estate to purchase their MNGO at a much lower cost and then proposed the DAO's buyback at a higher price for a juicy profit. Allegedly, this account could gain a net profit of $2 million just by selling half of its tokens. However, no conclusive evidence was given to substantiate these claims.
Both DonDuala and another DAO member, Maximilian, found themselves under the suspicion of community members who believed they might be linked to the FTX-related account. Responding to the swell of accusations, DonDual sidestepped questions regarding possible affiliation with the FTX buyer and addressed criticism of the proposal itself. Despite the speculations and resistance, DonDuala submitted a revised version of the proposal. This time around, only 156 million MNGO tokens would be bought back, and the options would be delivered to any users who had deposited in Mango DAO's governance system, regardless of their part in the voting process.
Although the initial proposal didn't receive sufficient approval, after some tweaks, it passed the test on the second attempt, and 46.67% of the options were utilized, leading the DAO to repurchase close to 73 million MNGO tokens. This operation left DonDuala gearing up to propose another buyback utilizing an eighth of the DAO's treasury in May at 5% less than the predicted book value. The action led to backlash from some members. Still, others defended the move, comparing it to the actions of "corporate raiders,” who buy up underpriced shares of companies to take control, which is legal in the United States.
Meanwhile, Avrham Eisenberg, who was involved in the Mango Markets exploit, was found guilty of fraud and now awaits his sentencing in July. Recent court reports also revealed him being charged with possession of child pornography.
Published At
5/6/2024 4:00:00 PM
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