Unstoppable Crypto Heists? 41 DeFi Platforms Fall Victim To Deadly Art Of Oracle Manipulation

DeFi protocols lost $386.2 million in 41 separate oracle manipulation attacks in 2022, according to a recent research report.

These attacks occur when bad actors manipulate the price oracles that DeFi protocols use to ensure assets on their platforms are priced in accordance with the wider cryptocurrency market.

Attackers use large amounts of cryptocurrency to quickly increase the trading volume of low-liquidity tokens on the targeted DeFi protocol, leading to fast, significant price increases not reflective of the wider market.

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Once an asset’s price has been driven up, attackers can exchange their artificially inflated holdings for other tokens with greater liquidity and a more consistent value, or use them as collateral to borrow assets, never to be repaid.

Blockchain analysis firm Chainalysis in its report stated that one example of an oracle manipulation attack was the $117 million attack on Mango Markets MNGO/USD, a DEX on the Solana SOL/USD blockchain, by Avraham Eisenberg.

Eisenberg used a $10 million USD Coin USDC/USD split across two separate accounts at Mango Markets to short and buy 488 million MNGO, the governance token for Mango Markets, respectively.

He leveraged his purchase of MNGO to buy more on other DEXes, pushing the price of MNGO up very quickly on spot exchanges.

With his artificially inflated MNGO holdings, Eisenberg was able to borrow against them and remove virtually all the assets held by Mango Markets.

Despite returning $10 million worth of cryptocurrency, Eisenberg faced charges of market manipulation filed by the SEC and CFTC, with Mango Markets suing him for the difference between what he stole and what he returned.

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