Controversy Arises Over Mango Markets Token Buyback Plan
The recent proposal by Mango DAO to buy back tokens at a premium to market price has caused controversy within the decentralized finance protocol’s governing body. Some members of the community have raised concerns that the buyback was orchestrated to benefit the buyer of MNGO tokens from FTX estate. These tokens were transferred to an anonymous account shortly before the buyback plan was proposed, suggesting that they may have been part of an over-the-counter deal.
Critics of the plan have accused its originator, DonDuala, of being connected to the FTX buyer. However, DonDuala has not responded to these accusations. On the other hand, supporters of the plan argue that it makes sense for the organization to repurchase MNGO tokens, even if it benefits the mysterious FTX estate buyer. They believe that the MNGO token is undervalued in the market and that repurchasing it would distribute profits to investors. An amended version of the buyback plan was approved on April 24.
Mango Markets is a Web3 app that enables 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 suffered a $116 million exploit through a flash loan attack in October 2022, resulting in a more than 25% decrease in the token price compared to its pre-exploit value, as reported by CoinMarketCap.
DonDuala’s Token Buyback Proposal
On April 7, DonDuala, a member of Mango DAO, proposed a buyback of 275 million MNGO tokens from current holders, reducing the token’s circulating supply. In exchange, the DAO would offer 9.995 million Dai (DAI) stablecoin derivative CHAI, valued at around $10.7 million. This implied a buyback price of $0.032 per MNGO token, while the market price of MNGO on April 7 was $0.02324, over 27% lower than the proposed buyback price.
To facilitate the exchange, the DAO would issue options tokens that could be exercised by individual holders. These options would only be distributed to accounts that participated in the vote for the proposal, preventing them from being obtained by exchanges and automated systems.
Discovery of the Mysterious FTX “Buyer”
On April 11, a DAO member named Donderper discovered that a mysterious account had received MNGO tokens from the bankrupt FTX exchange estate and was now using them to vote in favor of the buyback proposal. This discovery raised suspicions among community members. Donderper speculated that someone may have made a deal with FTX to buy MNGO tokens at a lower price and then proposed the buyback to the DAO at a higher price, potentially making a significant profit. However, no evidence of the alleged over-the-counter trade price was provided.
Some community members began to question the involvement of DonDuala and another DAO member, Maximilian, with the FTX-related account. However, DonDuala did not address these accusations directly and instead focused on defending the proposal, stating that the attention on the FTX buyer was a distraction from the core issue.
Proposal Rejection and Resurrection
The initial buyback proposal was voted down on April 12, with 52.3% of tokens being used to vote against it. DonDuala then submitted an amended version of the proposal, suggesting a buyback of 156 million MNGO tokens instead of the original 275 million. In addition, options would be distributed to all users who had deposited into Mango DAO’s Realm governance system, regardless of their participation in the vote.
Mango Markets co-founder Daffy Durairaj voiced opposition to the new proposal, accusing DonDuala and Maximilian of acting in their own financial interests. Durairaj claimed that they engaged in untrustworthy behavior and self-dealing, providing reasons to vote against the proposal.
The amended proposal passed on April 21, with over 67.9% of tokens voting in favor of it. Subsequently, the DAO bought back approximately 73 million MNGO tokens for 2.3 million CHAI.
Future Plans and Community Response
Following the buyback, DonDuala announced a new proposal to allocate one-eighth of the DAO’s treasury in May for further MNGO buybacks at a price 5% below the estimated book value.
Some members of the community expressed dissatisfaction with the buyback, claiming that it was manipulated by shady actors. However, others defended the proposal, arguing that the DAO should aim to match the book value of the tokens.
In other news, Avrham Eisenberg, the individual responsible for the Mango Markets exploit, has been found guilty of fraud and is awaiting sentencing. Additionally, he has been charged with possession of child pornography.