Mango Markets Hacker Allegedly Fakes Curve Short Attack to Exploit Aave

https://ukdaily.news/mango-markets-hacker-allegedly-fakes-curve-short-attack-to-exploit-aave-211841.html

As detailed by analysts at Lookonchain on Nov. 22, tokens on decentralized exchange Curve Finance (CRV) appear to have suffered a major hit Short seller attack. According to Lookonchain, on Nov. 13, ponzishorter.eth, an address associated with Mango Markets exploiter Avraham Eisenberg, first traded $40 million coin (USDC) to decentralized finance protocol Aave to borrow CRV for sale.

The law reportedly dropped the CRV price from $0.625 to $0.464 over the week. Fast forward to today, blockchain data shows that through two transactions, ponzishorter.eth borrowed another 30 million CRV ($14.85 million) and transferred it to OKEx for sale. Lookonchain’s team hypothesized that the trade was conducted to lower the token price “so many people who have been using CRV as collateral are facing liquidation.”

In response to the heavy selling activity, a wallet linked to Curve’s founder added another 20 million CRV in collateral. On Aave, the wallet address health factor was 1.65 at the time of publication, indicating an excess of collateral over borrowed assets.

but said by blockchain analytics firm Arkham, the trades “might just be a decoy,” with Aave being the primary target instead. Arkham claims that Eisenberg built a position of over $100 million in Aave for an elaborate trading system.

It is initially a non-CRV token diversion on Aave, which is illiquid on the platform but also has very low margin requirements, both of which are important factors in the exploit. The resulting attention would prompt users to buy the dip en masse to defend CRV’s price and others seek to urge the short seller to cover their position for a loss.

However, the actual conspiracy appears to be exploiting the possibility that Aave cannot cover Eisenberg’s CRV short positions as the platform reportedly lacks enough liquidity to buy back more than 20% of the short. This would then favor betting against Aave and the price drop of its native token:

“The real target here was AAVE’s vulnerable looping system, which Avi mentioned last month. Using $40 million to lend nearly $50 million to CRV could leave AAVE with severe bad debts.”

“In order to liquidate Avi’s position, Aave’s liquidators will not have an opportunity to repurchase all of the CRV that he has borrowed. AAVE will need to sell significant amounts of security module tokens to cover this loss,” Arkham wrote. A screenshot of a swap quote provided by the Company shows a potential swap impact of 89.8% between USDT and CRV for the estimated $100M position.

At the time of publication, CRV is up 15.47% to $0.5742 over the past 24 hours, while Aave’s price is down 6.33% to $53.54 over the same period. On Oct. 11, Eisenberg withdrew $117 million from the Mango Markets log and kept $47 million as a bug bounty before returning the rest, calling it a “highly profitable trading strategy.”