Mango Markets hacker would have simulated a Curve shorting attack to exploit Aave

As described by Lookonchain analysts on Nov. 22, decentralized exchange Curve Finance (CRV) tokens appear to have suffered a significant short seller attack. According to Lookonchain, ponzishorter.eth, an address associated with the Mango Markets operatorAvraham Eisenberg, first exchanged 40 million USD Coin (USDC) on November 13 on the decentralized finance protocol Aave to borrow CRV to sell it.

The act reportedly caused the CRV price to drop from $0.625 to $0.464 for the week. Fast forward to today, blockchain data shows that another 30 million CRV ($14.85 million) was borrowed by ponzishorter.eth through two transactions and transferred to OKEx for sale. The Lookonchain team hypothesized that the trade was carried out to drive the price of the token down “so that many people who used CRV as collateral would face liquidation.”

In response to the strong selling activity, a wallet associated with the Curve founder added 20 million more CRV as collateral. In Aave, The health factor of the wallet addresses was 1.65 at press time, indicating excess collateral against lent assets.

But according to saying per blockchain analytics firm Arkham, the trades “may simply be bait,” with Aave being the primary target instead. Arkham claims that Eisenberg built a position of more than $100 million in Aave for a sophisticated trading scheme.

First, this is a short diversion of CRV tokens on Aave, which has no liquidity on the platform, but also very low margin requirements, both of which are important factors for the exploit. The resulting attention would lead users to buy the dip en masse to defend the CRV price and others to try to squeeze the short seller into covering his position at a loss.

Nevertheless, the real conspiracy seems to be to exploit the possibility that Aave will not be able to cover Eisenberg’s short positions in CRV, since the platform allegedly does not have enough liquidity to buy back more than 20% of the shorts. This would then favor betting against Aave and the price of its native token falling:

“The real target here was AAVE’s vulnerable loop system, which Avi mentioned last month. Using $40 million to borrow nearly $50 million of CRV could leave AAVE with serious bad debt.”

“In order to liquidate Avi’s position, Aave’s liquidators will have no way to buy back all of the CRV it 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 $100 million position.

put a ton of usdc. you can borrow at 90% ltv

borrowed loads of $CRV. short psycho.

pump curve ridiculously.

aave have to liquidate usdc and buy back huge amounts of $CRV literally 50-100% slippage on orders that size

At press time, CRV was up 15.47% at $0.5742 over the past 24 hours, while Aave price declined 6.33% to $53.54 over the same period. On October 11, Eisenberg extracted $117 million from the Mango Markets protocol, keeping $47 million as a bug bounty before return the restcalling it a “highly profitable trading strategy”.

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Mango Markets hacker would have simulated a Curve shorting attack to exploit Aave