Mantra’s Abu Dhabi backers deny selling OM before $5bn crash

Abu Dhabi’s Shorooq is investor

‘No exploit or malicious act occurred’

The Abu Dhabi backers of a Dubai-licensed cryptocurrency business have denied wrongdoing after its token’s market cap dropped by more than $5 billion in a matter of hours, raising alarm among investors.

Mantra, a Hong Kong-based blockchain company focused on tokenising real-world assets, is backed by Abu Dhabi’s Shorooq Partners, which led an $11 million funding round for the business in March 2024.

In January Mantra announced a $1 billion tokenisation deal with Dubai property developer Damac.

OM – its token, or currency – is designed for trading physical assets on the Mantra network, which is licensed by Dubai’s Virtual Asset Regulatory Authority. 

It is also traded on various crypto exchanges. However, it lost more than 90 percent of its market value at the weekend, falling from more than $6 to below $0.50.

“Investors need to be careful,” Talal Tabbaa, CEO of Bahrain-based crypto broker CoinMena, told AGBI.  “Anything that is not bitcoin is very risky, which means you could have massive sell-offs like this.” 

Shortly after the collapse in OM’s price, observers pointed out that $227 million (or 4.5 percent of its market cap at the time) had been sold on crypto exchanges the preceding week, triggering speculation about foul play.

Shorooq has rejected those suggestions.

“Shorooq and Mantra have not sold OM tokens in the lead-up to or during this crash,” the venture capital company said in a statement on its website. 

“We can confidently confirm that no exploit or malicious act occurred.”

Shorooq attributed the sudden drop to a forced liquidation of large leveraged positions using OM as collateral. This triggered a mass sell-off, it said.

Forced digital sell-offs are often automated as a result of other assets dropping in value.

Mantra’s co-founder John Mullin said in a discussion hosted on X (formerly Twitter) that crypto exchanges had forced the OM liquidation. He is exploring legal action, he said.

“What we’re seeing here looks like a textbook liquidation cascade,” Darshana Manikkuwadura, a blockchain entrepreneur and expert, told AGBI.

Still, sell-offs can be manipulated, Manikkuwadura said.

“Just because liquidations were triggered doesn’t mean someone didn’t engineer the conditions for that to happen,” he said. 

“Sophisticated players, including whales [large investors] and institutional desks, know how to use low-liquidity periods to their advantage.”

OM’s risk was clear, according to Amit Sinha, chief technology and risk officer at digital asset loans marketplace CLST.

The movement of $227 million and the doubling in October of the amount of tokens should have raised red flags, Sinha wrote on LinkedIn.

Binance, the world’s largest crypto exchange, said in a statement that it had been warning potential buyers about OM risks since January.

The episode has raised concerns over UAE investors’ exposure to smaller, more volatile cryptocurrencies.

The ownership of OM tokens “has a very high concentration” in few hands, said CoinMena’s Tabbaa, “which makes it susceptible to these things”.

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