The first example illustrates system-based interdependencies. On 11 October 2022, Mango Markets suffered a 40-minute exploit in which attackers initiated a ‘pump-and-dump’ sequence to exploit failures in the surveillance ability of three different exchanges.
This exploit left a trail of bad debts and substantial legal, financial, and reputational risks for all the exchanges involved.
The analysis of the Three Arrows Capital saga presents an example of institution-based interdependencies and the risks associated with it.
As one of the first cryptocurrency firms to go bankrupt in 2022, which it filed for in July, the hedge fund’s collapse enabled substantial risk transmission to other participants in the broader cryptocurrency market networks; four months prior to that of FTX.