Controversy Surrounds Mango Markets Token Buyback Proposal
Mango Markets, a decentralized finance protocol, has faced controversy over its recent plan to buy back tokens at a premium to market price. The proposal, made on April 7, sparked accusations that it was designed to benefit the buyer of MNGO tokens from the FTX estate. These tokens were transferred to an anonymous account just days before the buyback plan was proposed, leading some to suspect that they were part of an over-the-counter deal.
Critics of the plan claimed that DonDuala, the originator of the proposal, was connected to the FTX buyer. However, DonDuala did not respond to these allegations. On the other hand, some members of the community supported the plan, arguing that it made sense for the organization to repurchase MNGO tokens, even if it benefited the mysterious FTX estate buyer. They believed that the MNGO token was undervalued in the market and that repurchasing it would distribute profits to investors. An amended version of the buyback plan was eventually approved on April 24.
Mango Markets is a Web3 app that enables crypto users to borrow and lend various cryptocurrencies. It operates on the Solana network and is governed by MNGO tokenholders, who form the decentralized autonomous organization Mango DAO.
The protocol had previously suffered a flash loan attack in October 2022, resulting in a loss of $116 million. As a result, the token price had dropped by over 25% compared to its preexploit value.
The token buyback proposal was initially put forward by Mango DAO member DonDuala on April 7. The proposal suggested that the DAO should repurchase 275 million MNGO tokens from current holders, reducing the token’s circulating supply. In exchange, the DAO would offer holders 9.995 million DAI stablecoin derivative CHAI, valued at approximately $10.7 million. This implied a buyback price of $0.032 per MNGO token, significantly higher than the market price at the time.
To facilitate the exchange, the DAO would issue options tokens that could be exercised by individual holders. However, to prevent these tokens from being distributed to exchanges and automated systems, only accounts that participated in the proposal’s vote would receive the options.
On April 11, a community member named Donderper discovered that a mysterious account had received MNGO tokens from the FTX estate and was using them to vote in favor of the buyback proposal. This raised suspicions among some members, who believed that the account was involved in a backdoor deal with FTX. There were even suggestions that DonDuala and Maximilian, another DAO member, were affiliated with the FTX-related account. However, no concrete evidence was provided to support these claims.
DonDuala addressed the criticism in a later post, avoiding the question of their affiliation with the FTX buyer. Instead, they focused on defending the proposal and argued that the focus on the FTX buyer was a distraction from the core issue at hand.
Despite the controversy, the amended buyback proposal was eventually passed on April 24, with a majority of tokenholders voting in favor. The DAO proceeded to buy back approximately 73 million MNGO tokens for 2.3 million CHAI.
Following the buyback, some members expressed dissatisfaction on social media, accusing the DAO of making shady deals and taking advantage of passive token holders. However, others defended the decision, arguing that it was important to exit at book value.
In unrelated news, Avrham Eisenberg, the individual responsible for the Mango Markets exploit, was found guilty of fraud and is scheduled to be sentenced on July 29. Court documents also revealed that he was charged with possession of child pornography.