Allegations have surfaced that Mantra and its market makers manipulated liquidity metrics for the OM token by exploiting vulnerabilities in data aggregators’ self-reporting systems, as discussed in the latest episode of “The Chopping Block” podcast.
The scheme involved distorting the circulating supply and trading volume of OM to give the impression of more significant market activity than actually existed.
Podcast participants revealed that the Mantra team collaborated with market makers to fabricate trading volume by cycling tokens among controlled addresses and exchanges to inflate volume metrics without genuine organic involvement.
As a result, OM appeared to be a top-25 asset by market capitalization despite less than 1% of the token supply being truly liquid, according to on-chain observers.
The strategy exploited gaps in CoinGecko and CoinMarketCap’s validation processes, which rely heavily on self-reported data from project teams, cross-referenced with listings on major exchanges and basic blockchain analytics.
However, bad actors can bypass these checks by allocating tokens to market makers and orchestrating on-exchange activity that mimics organic trading, even in the absence of retail participation.
The artificially inflated liquidity crumbled when a significant OM holder tried to sell off their tokens, resulting in a 90% price crash within 90 minutes. This event wiped out billions in market capitalization and exposed the thin trading depth of the asset.
Possible Solutions
To address the loopholes that allowed the OM incident to occur, industry experts suggested various solutions.
One proposal was to mandate the disclosure of all market-making agreements as a prerequisite for token listings on major exchanges like Binance and Coinbase.
Transparent disclosure would reveal whether trading volume support comes from genuine distribution or primarily from incentivized liquidity arrangements.
This approach mirrors practices in traditional finance, where market-making contracts for public equities are disclosed in securities filings.
In the crypto space, such disclosures would need to cover rebate structures, loan terms, inventory risk responsibilities, and any volume guarantees provided by market makers.
Another solution discussed was the enhanced verification of token distribution claims. Exchanges and data aggregators could implement stricter on-chain validation standards, including wallet audits and evaluations of wallet ownership concentration, to ensure that reported circulating supplies are independently verifiable.
Challenges
However, participants acknowledged potential challenges. Market makers may resist disclosures to safeguard proprietary arrangements, and exchanges could face increased operational costs.
Moreover, there is a risk that enforcement without regulatory support could lead to inconsistent adoption across platforms, creating opportunities for malicious actors to exploit arbitrage.
Despite these obstacles, the podcast participants agreed that coordinated action by major exchanges could significantly mitigate the problem.
If leading platforms mandated transparency for new listings, projects seeking legitimate liquidity access would have strong incentives to comply, potentially eliminating practices that undermine user trust and market stability.
The collapse of OM and the controversy surrounding its liquidity practices have reignited the focus on data reporting standards in the crypto industry.
