Mantra Co-founder JP Mullin Explains 90% OM Token Collapse

Mantra co-founder John Patrick Mullin says he was asleep when the OM token selloff started.

By the time he was woken up in his hotel room, the token powering his real-world asset focused blockchain had already crashed by more than 80%, wiping out billions in market cap on paper and sparking confusion across the crypto world.

Mullin joined Coinage for a new interview to shed light on decisions that were made into the collapse, which he attributes to “massive forced liquidations… in a low liquidity environment on a Sunday night.” But the uncomfortable truth for the entire crypto industry may be that much of what unfolded in a day may stem from the project’s own decisions in the years leading up to this weekend — and ones that countless other projects have similarly made — around token structure, liquidity, and transparency for holders.

Mantra's investors, Mullin, and the project have so far been united in their defense that the OM token collapse was not triggered by any insider selling, but rather by a mass liquidation on one exchange. Mullin declined to name the exchange in question.

“These were all clean, fresh, unmarked wallets,” Mullin said. “I label all the wallets that I’m aware of on Etherscan so I can easily track everything.”

But therein lies one problem: Mantra was a bit unique in the sense that not only did it have native tokens on its own Layer-1 blockchain since last year, but also millions of OM tokens which were launched years earlier as ERC-20 tokens on the Ethereum blockchain. Mantra had set up the ability for users to bridge tokens to various other blockchains, including Polygon, Base, and Mantra’s own L1. As Mullin shared with Coinage, Mantra worked with various market makers (many of which were their investors) to manage trading on various exchanges, which mostly appear to be off-shore.

After the collapse, Binance, which had listed OM, tried to clarify that it had taken issue with Mantra's token supply in January and had warned users on its site. "Since January this year, Binance has also issued a pop-up warning for $OM on its spot trading page to inform users that the token has undergone significant changes to its tokenomics increasing its supply," the exchange wrote on X.

Mullin rejected any suggestion of artificial price manipulation, stating: “We ever engaged in any sort of… pumping of the price or pumping of the token with our market making partners. That is just not how it works.” But even he conceded the obvious: “I don’t think… the positions that [market makers] had were capable of handling this massive forced selling.”

So, as is always the case with these collapses (like Terra's $40 billion collapse in 2022) the question becomes what did Mullin and the Mantra team know, and when?

Leading into the collapse this weekend, various people in crypto were calling out the decision to merge Mantra’s legacy ERC-20 token with their new L1 as ratified by a DAO vote in February last year — one that Mullin defended despite concerns around voter turnout and the long-term implications of having such a bloated supply immediately mirrored to a new chain.

Hedgeye analyst Ishmael Asad had sparred with Mullin just days before the collapse on X. "[S]upply doubled; only 50% circulating," he wrote in a tweet to Mullin on April 10. "[I] get it though - you'll need the whole community to keep diamond-handing if you & other insiders want any hope of exiting at these prices when your unlocks begin in a few weeks!"

"Hah. Nice research. You realize the community voted unanimously to increase supply to support the merge of the old ERC and the new mainnet in Feb of 2024 right?" Mullin responded. "Either way, supply doubled over 5 months ago… and the market knew about it for over a year. This isn’t new."

Just three days later, $5 billion in paper value was erased as OM cratered.

That DAO vote ultimately created a one-for-one burn mechanism where ERC tokens sent to a burn address would be reissued on Mantra's new chain. Mullin explained the “mirror bucket” was designed with security in mind, and acknowledged that over 100 million tokens had already been bridged. “A lot of the tokens are in the market already,” he said. And while Mullin repeatedly emphasized that Mantra hasn’t sold tokens — and that his investors haven’t either — the reality is that many OM holders still got crushed.

“I feel responsible. Even if I didn’t do anything negligent or malicious or anything,” he said. “They believed in me… and they lost money on that.”

Mullin suggested the team is working on a buyback and burn program, and that institutional interest in the project remains strong. “The business is more than solvent,” he claimed. “We’ve actually had a lot of interest… who want to support with a buyback program.”

But the collapse highlights what has become a familiar pattern in crypto: Large fully-diluted market caps taken at face value without much transparency into supply issues, or over-the-counter agreements, or market-maker contracts to give anyone real insights into potential supply and demand imbalances. Perhaps this is potentially why the SEC just issued new guidance last week that could be a preview into disclosures that could become the new norm for the industry. Part of that guidance highlights supply changes and market maker relationships as tantamount importance.

"We are fully committed to providing as much information as humanly possible, so I make that promise," Mullin said.

As far as the analyst who had just foreseen another crypto collapse, Asad wasn't taking the victory lap you might expect. When reached for comment after the OM collapse on Monday, Asad said Mantra was just egregiously overvalued as it climbed its way into the top 50 blockchains by market cap last year.

"It made it into the top 20 coins after its seemingly endless rise," he said. "Everyone seemed to accept Mantra as the leader in the [real-world asset] space, meanwhile it hasn’t actually tokenized any RWAs."

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