Crypto Hackers Stole $386,200,000 From DeFi Protocols Via ‘Oracle Manipulation Attacks’ In 2022: Chainalysis
A specific method of hacking decentralized finance (DeFi) protocols is on the rise, according to blockchain data platform Chainalysis.
In a new blog post, the market intelligence firm estimates that hackers stole a total of $386.2 million from DeFi protocols in 2022 using a type of attack known as “oracle manipulation.”
Oracle manipulation involves hackers artificially inflating the trading volume of a token with low liquidity on a DeFi protocol, which is designed to increase the price of the token.
Chainalysis notes that hackers will often use flash loans to secure the initial capital needed to inflate the token’s trading volume, then exchange the designated token for a more stable crypto-asset after pumping up the price.
The firm estimates there were 41 separate oracle manipulation attacks in 2022, and it points to October’s $100 million exploit of Solana-based ( SOL ) decentralized crypto exchange Mango Markets ( MNGO ) as a good example of what that kind of hack looks like.
Avraham Eisenberg, who runs a trading firm and describes himself as a “digital art dealer”, went public the week after the incident, claiming he was the mastermind behind what he described as a “legitimate” exploitation of Mango.
Eisenberg claimed he was involved in a trading team that had a highly profitable strategy. The scheme rendered the decentralized exchange insolvent and users could not access their funds.
Chainalysis outlines how Eisenberg launched the attack with $10 million worth of USD Coin (USDC) in two separate accounts at Mango Markets.
“Eisenberg used one account to short 488 million MNGO (MNGO, or Mango, is the ticker symbol for Mango Markets) – effectively selling 488 million MNGO on leverage – while the other account took the opposite side of that trade, using leverage to buy same quantity.
Eisenberg’s leveraged purchase of MNGO, combined with additional purchases of MNGO on other DEXs, pushed the price of MNGO up very quickly on spot exchanges. This was possible because MNGO was a low liquidity asset without much trading volume. The account used to buy MNGO immediately made approximately $400 million in paper gains because all of Eisenberg’s buying activity significantly increased the asset’s price.
With such a high portfolio value, Eisenberg was able to borrow against his artificially inflated MNGO holdings and remove virtually all of the assets held by Mango Markets. This activity caused MNGO’s price to drop immediately, so his long positions were liquidated due to the loss of collateral value, but it was too late – Eisenberg had already ‘borrowed’ all of Mango Market’s assets of any real value.”
In December, Eisenberg was arrested by the US Department of Justice (DOJ) in Puerto Rico on charges of goods fraud and manipulation. In January, the Commodity Futures Trading Commission (CFTC) filed market manipulation charges against the trader, and later that month he was sued by Mango Markets.
In its 2023 Crypto Crime Report, Chainalysis notes that hackers stole a total of $3.8 billion from cryptocurrency businesses last year, the highest annual figure ever.
Don’t Miss a Beat – Subscribe to get crypto email alerts delivered straight to your inbox
Check price action
Follow us on TwitterFacebook and Telegram
Surf The Daily Hodl Mix
 
Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making high-risk investments in Bitcoin, cryptocurrency or digital assets. Please note that your transfers and trades are at your own risk and any losses you incur are your responsibility. The Daily Hodl does not recommend the purchase or sale of cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Generated Image: Midjourney
