tl;dr
Avraham Eisenberg, a crypto trader, stands accused of draining over $100 million from Solana DeFi trading platform Mango Markets in 2022. The trial revolves around the question of whether risky DeFi exploits like his are subject to existing U.S. criminal law. Eisenberg's attorney argues that prosecu...
Avraham Eisenberg's Crypto Trading Accusations Summary: Avraham Eisenberg, a crypto trader, stands accused of draining over $100 million from Solana DeFi trading platform Mango Markets in 2022. The trial revolves around the question of whether risky DeFi exploits like his are subject to existing U.S. criminal law. Eisenberg's attorney argues that prosecutors cannot prove the assets involved were commodities or that the transactions involved commodity swaps, potentially rendering the criminal charges inapplicable. U.S. government attorneys frame Eisenberg's exploits as a modern twist on old-school fraud. Eisenberg's actions effectively turned Mango Markets insolvent, and he referred to the exploit as "a highly profitable trading strategy."
In a fiery exchange of opening statements today before a Manhattan jury, federal prosecutors squared off against lawyers for Avraham Eisenberg, the crypto trader accused of committing fraud by draining over $100 million from Solana DeFi trading platform Mango Markets in 2022.
Whether it was actually Eisenberg who drained the platform of all its assets a year and a half ago was never debated, however—that fact is uncontested. Instead, both sides focused their efforts Monday on addressing a far more nuanced question: are risky DeFi exploits like the one employed by Eisenberg subject to existing U.S. criminal law?
Eisenberg’s attorney, Sanford Talkin, told the jury today that prosecutors will be unable to prove that the assets involved in the Mango Markets exploit were commodities, nor that Eisenberg’s transactions involved commodity swaps. If such foundational facts fail to be established by prosecutors, then the two criminal charges filed against Eisenberg—commodities fraud and commodities manipulation—would appear to not apply to Mango Market transactions.
“They will try to tell you USDC is a commodity, even if MNGO is not,” Talkin said today, according to reports from Inner City Press. “But it is not. Nor are these swaps. So, the government can’t even get out of the gate on the first two counts of this indictment.”
U.S. government attorneys struck a very different tone when describing Eisenberg’s exploits, attempting to frame them as old-school fraud set in a high-tech context. “Consider this scam: a person sells a fake diamond ring—worthless plastic,” U.S. attorney Tian Huang began her opening statement today. “The con man disappears and runs off. This case is a modern twist on that.”
Both attorneys spent the majority of their time with the jury, however, attempting to walk a panel of New Yorkers that have no specialized crypto knowledge through the intricacies of a complex DeFi exploit.
In October 2022, Eisenberg sold millions of dollars worth of perpetual futures on MNGO—Mango Markets’ native token—to another Mango account under his control. He then bought millions of dollars worth of MNGO, pumping its price, before borrowing against his boosted MNGO perpetuals, to the tune of $110 million (the entire value of Mango’s treasury).
The exploit—which is prohibited by existing market manipulation laws in traditional finance—effectively single-handedly turned Mango Markets insolvent.
Days after the trades, Eisenberg revealed himself as the culprit. He insisted, though, that the exploit was legal under existing laws, referring to it as “a highly profitable trading strategy.”
Statement on recent events:
I was involved with a team that operated a highly profitable trading strategy
last week.
In addition to the legal action by the SEC, Mango Labs and the CFTC have also filed separate lawsuits against Eisenberg.
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