Eisenberg's $110M Mango Markets Scheme: Courtroom Clash Over Future of Crypto Regulation
Summary:
Avraham "Avi" Eisenberg is accused of executing a fraudulent scheme on the Mango Markets decentralized exchange, leading to a loss of $110 million. Eisenberg defends his actions as legal, stating he operated a profitable trading strategy. Despite some funds being returned, Mango Markets is suing Eisenberg for $47 million in damages. The case has sparked legal discourse around decentralized finance practices, with some saying it could shape the future of crypto regulation.
US Assistant Attorney Tian Huang has likened the alleged $110 million deceit on the decentralized exchange Mango Markets by Avraham “Avi” Eisenberg to a common scam involving fake diamond rings. Pursuant to a report by Inner City Press on April 9, the prosecutor argued in a federal court in Manhattan that Eisenberg's actions on October 11, 2022, equated to fraud and manipulation of the market. He said Eisenberg, similar to a person selling a sham diamond ring, absconded after defrauding the unsuspecting.
Huang further pointed out Eisenberg's unscrupulous activity, stating that within a span of 20 minutes, Eisenberg had falsely inflated the value of a particular cryptocurrency by 1,000%. This was done to deceive Mango Markets into believing he had substantial holdings which he, in reality, did not. By doing so, he effectively swindled the marketplace and made off with over $110 million in cryptocurrency.
Defending his client, Sanford Talkin, Eisenberg's lawyer, refuted the allegations by stating that Eisenberg had implemented a lucrative trading strategy on the platform. The defense also pointed out that Eisenberg was not risk-averse as he put $13 million of his own money into the trade, knowing full well he could lose everything. Talkin stressed that Eisenberg's activities on Mango Markets were not clandestine and could be seen by anyone on the platform. Furthermore, if anyone chose to, they could have traded against him.
In October 2022, Eisenberg manipulated the value of MNGO, the native token of the platform, relative to USD Coin (USDC). He then proceeded to extract a series of loans using the inflated value of MNGO, thereby effectively draining the platform's treasury of cryptocurrencies that had an estimated value of approximately $110 million.
Days following the incident, Mango Markets announced the return of about $67 million in various digital assets. Eisenberg later admitted to his actions on the platform, insisting that he believed his actions were both legal and permissible within the framework of the platform's smart contract.
The Mango Markets team has since sued Eisenberg for $47 million in damages plus interest, notwithstanding the assets that were returned.
In reference to the case, Gabriel Shapiro, a lawyer specializing in cryptocurrency, argues that the ruling in Eisenberg's case could have more significant implications on the future of the cryptocurrency industry than the criminal trial of Sam Bankman-Fried.
Shapiro, the head legal advisor at Delphi Labs, expressed his approval of the government's accusation of Eisenberg's market manipulation. However, he disagreed with the claim that Eisenberg had violated some loan agreement through his use of the platform, terming it as absurd and contrary to how DeFi operates.
Published At
4/10/2024 4:44:46 AM
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