Mantra's OM Token Crashes 80% Prompting $80M Burn

Mantra's OM token experienced a significant crash in April, prompting the company's founder and CEO, John Mullin, to initiate an $80 million burn of OM tokens in an effort to regain user trust. However, the underlying reasons for the crash remain unclear, according to blockchain investigators.

Natalie Newson, a senior blockchain investigator at CertiK, emphasized that a detailed forensic study, similar to the one conducted post-FTX, would be necessary to substantiate claims of calculated exploitation. She highlighted the challenges of tracing over-the-counter (OTC) transactions, which are often more opaque than public on-chain activities.

Newson's comments came after Mantra released a post-crash statement, urging centralized exchange partners to collaborate in further investigating the incident. She stressed the importance of distinguishing between public on-chain activity and the more opaque nature of OTC deals. OTC crypto transfers involve buying and selling cryptocurrencies outside of exchanges, designed to enable deep liquidity and big trades while mitigating price volatility.

Mullin had previously disclosed that the Mantra team had conducted a small amount of OTCs, up to $30 million of OM tokens. Newson suggested that the accumulation of approximately 100 million OM by a whale appeared to be the result of secondary market transactions, not necessarily direct activity from Mantra insiders.

Mullin had denied allegations that the OM crash resulted from an insider token dump, claiming that blockchain analytics platform Arkham had "mislabelled" some wallets. Newson, however, stated that data from Arkham and similar platforms like Nansen would be insufficient to confirm or deny insider involvement. She explained that blockchain analytics tools can provide directional clues, but without access to off-chain agreements and centralized exchange records, drawing definitive conclusions would be difficult.

Whale Alert’s co-founder Frank Weert also highlighted the complicated nature of tracing transactions in the OM token crash, noting that while there are ways to get data from the node, it does not seem to be easy to get a full history. Mullin had mentioned considering hiring a forensic auditor following the OM crash but had made no decision as of April 16.

The OM token crash underscores the need for a thorough forensic study to fully understand its causes. By distinguishing between public on-chain activity and OTC transactions, analysts can gain a clearer picture of the market dynamics at play. This, in turn, will help in developing more effective security measures and regulatory frameworks to ensure the stability and integrity of the cryptocurrency market. The lack of transparency in OTC transactions can make it challenging to identify the root causes of market disruptions, highlighting the importance of robust security measures and regulatory oversight in the cryptocurrency industry. As the market continues to evolve, it is essential for platforms and investors to prioritize transparency and accountability to build trust and confidence in the cryptocurrency ecosystem.