SBF

Chapter 41Mango Markets

The gods send warnings, but they are tough to see without the benefit of hindsight.

One month before FTX entered its final act, something happened that looked like a microcosmic allegory of what was to come.

How do you turn $10 million in stablecoins into just under $50 million in a day? Market manipulation on a token that a DeFi project has placed too much faith in. That's one way.

SBF pops up in the story of Mango Markets, though it has nothing much to do with FTX directly, but its story illuminates both the flimsiness of new token prices and the dangers of projects leaning operationally on an untested financial instrument.

Mango Markets is a money market and decentralized perpetual swaps exchange that operates on the Solana blockchain (SBF's favorite chain, from Chapter 26).

It has a token named mango (MNGO). Crucially, this decentralized exchange allowed users to make leveraged trades using various crypto assets as collateral. One of the assets users could post as collateral was its own token, mango.

How many similarities to FTX can we squeeze into one $100 million vignette?

So here's what happened. On October 11, a trader named Avraham Eisenberg funded two different wallets with $5 million in USDC stablecoins apiece.

Then he went on Mango Markets and made an offer for $5 million in long perpetuals on mango. His other wallet took the deal and bought the shorts on the other side. So now he's massively long and short on mango at once.

The price of ...