Avraham Eisenberg, a trader accused of orchestrating a massive multi-million dollar scam on the decentralized exchange Mango Markets, is scheduled to face trial in New York on December 4. The scam took place on October 11, 2022, when Mango Markets announced via Twitter that a hacker had manipulated the platform’s price oracle, resulting in a staggering loss of approximately $110 million.
Both the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have filed charges against Eisenberg. The CFTC specifically accuses him of fraudulent activities, market manipulation, and violating the Commodity Exchange Act. The commission is seeking financial sanctions, a ban on trading virtual asset commodities, and reimbursement of funds.
According to the CFTC’s filing, Eisenberg’s scheme aimed to artificially inflate the value of his swap contract holdings on Mango Markets. His alleged plan involved borrowing a substantial amount of digital assets without any intention of repayment.
Mango Markets, a Solana-based decentralized exchange governed by a Decentralized Autonomous Organization (DAO), offers various financial services to cryptocurrency investors, including lending, borrowing, swapping, and leveraging for trading purposes.
On December 27, 2022, Eisenberg was arrested by the US Department of Justice for his involvement in the Mango Markets scam. Surprisingly, he publicly admitted to the scam on Twitter, describing it as “a highly profitable trading strategy.”
It is believed that Eisenberg created two anonymous accounts on Mango Markets just before the hack and funded each with $5 million in USDC to carry out the scam. With one account, he established a long position valued at $19 million, comprising over 400 million MNGO/USDC swaps at approximately $0.04 per swap. Simultaneously, he used the second account to create an equal short position.
The CFTC alleges that Eisenberg orchestrated a “wash” transaction, effectively concealing his involvement by anonymously creating both accounts. This fraudulent maneuver exploited the vulnerability of the system.
Following the security breach, Mango DAO, the governing body of Mango Markets, proposed a reward of $47 million to the person responsible for exploiting the vulnerability. They also offered immunity from legal action if tokens worth $67 million were returned. Eisenberg, the perpetrator, publicly accepted these terms. However, it remains uncertain whether the tokens were actually returned to Mango DAO.
While Mango Market DAO and its community may consider leniency, the US legal system and law enforcement agencies are known for their lack of mercy. The upcoming trial of Avraham Eisenberg has captivated the cryptocurrency community, as he faces federal charges of commodities fraud, commodities manipulation, and wire fraud. Eisenberg’s plea of not guilty on January 9, 2023, sets the stage for a high-stakes trial on December 4, with the potential for a severe prison sentence of up to 20 years.
