Guy accused of wrecking crypto exchange now hauled into court
Mango Markets still offline for now ... but v4 comeback release looms
The man accused of bringing down decentralized crypto exchange Mango Markets through market manipulation has made his first appearance in court in connection with the theft of millions in cryptocurrency.
Avraham Eisenberg was arrested in late December in Puerto Rico in relation to charges [PDF] filed by the US Securities and Exchange Commission, which allege he made off with more than $110 million in crypto "by artificially manipulating the price of certain perpetual futures contracts."
A Department of Justice grand jury indicted Eisenberg in early January, leading to this latest court hearing.
According to the lawsuit, Eisenberg is alleged to have used a pair of accounts on Mango Markets to pump the price of the MNGO "governance token" used on the platform. Using a series of trades between his two accounts at incrementally higher prices, the SEC alleges that Eisenberg raised the value of MNGO by more than 2,200 percent in a single day of trading.
Eisenberg, in turn, used his position "as collateral to borrow and ultimately withdraw from the Mango Markets platform approximately $116 million worth of various crypto assets – some of which belonged to investors trading on the Mango Markets platform, thereby draining all available assets from the platform," the suit alleges.
On October 12, 2022, a day after the attack, Mango's decentralized autonomous organization (DAO) decided to halt a new platform upgrade, and closed its entire market. As of now, it's still offline, but Mango's homepage indicates it's planning a comeback release dubbed "Mango v4" sometime in the future.
SEC calls out 'trading strategy'
According to the SEC complaint, shortly after Mango's collapse, a Twitter account allegedly controlled by Eisenberg tweeted of what it called "a highly profitable trading strategy" that the tweeter insisted was legal since it used the protocol as designed "even if the development team did not fully anticipate all the consequences of setting parameters the way they are."
The posts went on to say that Mango Markets became insolvent, and to remedy the situation the poster then settled with the DAO "with the goal of making all users whole."
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Eisenberg returned approximately $67 million of the gains to Mango Markets, but the DAO wasn't satisfied with him keeping the remainder. A few days after the SEC announced its case, Mango Labs sued Eisenberg to recover the remaining funds, alleging Eisenberg's negotiations with the company were "unlawful" because his demands included Mango Labs' releasing claims against him "and precluding them from pursuing a criminal investigation."
"Since the attack, [Eisenberg] has continued to plot to attack Mango Markets further, in public, and has used the converted funds to attack other cryptocurrency protocols as well," the exchange's lawyers argued in the suit.
Kenneth Polite, assistant attorney general of the DoJ's criminal division, said the crimes Eisenberg is accused of aren't anything new – they're just a new frontier in the same old financial crimes.
"With this prosecution, the Criminal Division is sending the message that no matter the mechanism used to commit market manipulation and fraud, we will work to hold those responsible to account," Polite said.
Eisenberg has been charged with one count each of commodities fraud, commodities manipulation and wire fraud. If convicted, he faces a maximum of 10 years each for the commodities counts and up to 20 years for the wire fraud. ®