As stated by Chainalysis, bad actors drained protocols for decentralized finance (DeFi) without exploiting a vulnerability in the protocol’s software code. Professionals call them oracle exploitation attacks, which involve the use of massive quantities of cryptocurrencies by malicious players to increase the transaction volume of low-liquidity crypto tokens on the intended DeFi protocol. In 2022, 41 distinct oracle exploitation assaults are estimated to have caused $386,2 million in losses to the protocols associated with DeFi.
On the basis of data provided by Chainalysis, certain assailants have argued that oracle fraud attacks should not be deemed illegal. Avraham Eisenberg, the person who was held accountable for a major oracle manipulation operation in 2022, defended the legality of his conduct and demonstrated a “profitable trading scheme.” Despite this, the SEC noted that Eisenberg’s activities constitute manipulation of markets.
In addition, Chainalysis reported that the SEC, CFTC, and DOJ all brought market manipulation allegations against Eisenberg. According to reports, these hackers aren’t allowed to evade culpability, even if the targeted protocol was profitable. During bug reward negotiations with Mango Markets DAO, Mango Markets also initiated a lawsuit on Eisenberg for failing to engage in “lawful negotiations.”