The head of the FTX crypto exchange, Sam Bankman-Fried, said that it was not the incorrect operation of price oracles that allowed the attacker to withdraw more than $100 million from the DeFi protocol of Mango Markets, but the flaws in the risk assessment system.
1) When it comes to oracles,
you just have to make up your own damn mind pic.twitter.com/7kZATSLpQM
— SBF (@SBF_FTX) October 12, 2022
“When it comes to oracles, you just have to make your own damn decision,” he wrote.
An unknown person used a deposit of 5 million USDC to manipulate the price of the MNGO token by opening a large margin position in perpetual swaps. Due to low liquidity in the spot market, the price of the asset briefly jumped from $0.038 to $0.91. This allowed the hacker to overstate the amount of collateral in MNGO, take loans in several cryptocurrencies against it, and withdraw funds.
“So, something went wrong. Oracle screwed up? I think not really. Or, rather, it depends on what kind of speculation the information was, ”Bankman-Fried believes.
According to him, the tool delivers a “raw price flow”, and then everything depends on the operation of the risk assessment mechanism. As an example, he cited the operation of a similar system on the FTX platform. It does not take into account a price increase of more than 20% over a five-minute period.
“In particular, while the indexed price [MNGO] on FTX at its peak increased by about 100%, on some exchanges the movement (temporary!) Was +900%, ”said the head of FTX.
He also emphasized that the exchange charges a larger percentage of margin for collateral, the larger the position. If someone decided to borrow $500 million from MNGOs, the platform would require a fully funded collateral of 500% of the amount, Bankman-Freed said.
“The reason is essentially that large positions – especially in illiquid tokens – can have a big impact. [на цену]”, he added.
Returning to the oracles, the head of FTX noted that this tool provides correct information, but its processing and assessing the safety of positions is the task of the risk assessment engine. The mechanism doesn’t have to work in “manual mode,” but it does need to have a set of “conservative rules” to respond to large price movements, Bankman-Fried said.
Recall that in April 2022, Waves Platform CEO Alexander Ivanov accused Alameda Research of Bankman-Fried of manipulating the price of the WAVES token. The founder of the company called the statements “badly concocted conspiracy theory.”
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