Mantra (OM) token crash exposes the 'critical' liquidity issues in crypto

Mantra founder and CEO John Mullin has begun an $80 million burn of OM tokens to regain users' trust following the token's crash earlier in April.

Mantra founder and CEO John Mullin has begun a $80 million burn of OM tokens to regain users’ trust following the token’s crash earlier in April. However, the question of the underlying reasons for the crash remains unanswered, blockchain investigators told Cointelegraph.

Unpacking Mantra’s OM crash would require a detailed forensic study rather than just basic blockchain analysis, said Natalie Newson, senior blockchain investigator at the blockchain security firm CertiK.

“A full forensic investigation, akin to what we saw post-FTX, would be needed to substantiate claims of calculated exploitation,” Newson said, highlighting challenges of tracing over-the-counter (OTC) transactions.

Newson’s perspective on the OM crash came days after Mantra released its post-crash statement, asking centralized exchange partners to collaborate on further unpacking the incident.

Onchain activity versus opaque OTC deals

Addressing the OM token crash, Newson stressed the importance of distinguishing between public onchain activity and the “more opaque nature of OTC deals.”

Mantra CEO Mullin disclosed in an interview with Coffeezilla on April 15 that the Mantra team had “done a small amount of OTCs,” up to $30 million of OM tokens.

Unlike traceable transactions on centralized exchanges, OTC crypto transfers involve a method of buying and selling cryptocurrencies outside of exchanges, designed to enable deep liquidity and big trades while mitigating the volatility of prices.

“In this case, the accumulation of approximately 100 million OM by a whale appears to have been the result of secondary market transactions — not necessarily direct activity from Mantra insiders,” Newson said.

Analysis by Arkham or Nansen is not enough

As previously mentioned, Mullin denied allegations that the OM crash resulted from an insider token dump, claiming that blockchain analytics platform Arkham had “mislabelled” some wallets.

Newson said that data from Arkham and similar platforms like Nansen would be insufficient to confirm or deny insider involvement.

“To confirm coordinated insider behavior, it would likely require more than just basic wallet tracing on platforms like Arkham or Nansen,” Newson said, adding:

To quickly unpack this situation, it seems a whale, possibly an institution, had been accumulating OM tokens through OTCs. After reaching a substantial amount of tokens, the whale began dumping them, ultimately leading to a significant crash in the token price.

Newson is not alone in highlighting the complicated nature of tracing transactions in the OM token crash.

“There are ways to get data from the node, but it does not seem to be easy to get a full history,” Whale Alert’s co-founder Frank Weert told Cointelegraph.

Mullin previously said that the team had been considering hiring a forensic auditor following the OM crash but had made no decision as of April 16.

Arkham did not respond to multiple Cointelegraph inquiries to comment on the Mantra incident.