Mango Market Exploiter Faces Commodities and Market Manipulation Charges in the U.S.

Self-acclaimed game theorist and crypto trader Avraham Eisenberg has been arrested in Puerto Rico and charged with fraud by the United States Attorney’s Office in Manhattan following allegations that he exploited the decentralized finance (DeFi) platform Mango Markets and attempted to steal $110 million.

The arrest emanated from the October incident when the Solana-based decentralized exchange suffered a cyber attack. The hack allowed the cybercriminals to net around $110 million from the platform using a rare trading strategy to manipulate the price of Mango’s token MNGO. 

Arrested Despite No Legal Action Agreement 

In an attempt to recover the stolen funds, the Solana-based margin trading and lending platform proposed to let the criminals go free if they returned the assets.

The proposal, voted on by nearly 97% of the community, noted that holders of MNGO tokens would not pursue legal actions provided the thieves returned the agreed-upon assets, referring to the $50 million in various crypto assets the hackers promised to return. 

Despite the agreement, Eisenberg was arrested yesterday in Puerto Rico. According to a criminal complaint unsealed Tuesday, Eisenberg used two Mango Markets accounts he controlled to manipulate the price of the company’s perpetual swaps, which are futures that allow traders to keep positions open.

He was also accused of pushing up the price of the swaps by 1,300% in just 20 minutes, using the increased value of the trades to borrow and then withdrawing around $110 million worth of various cryptocurrencies from other investors’ deposits on the exchange.

Eisenberg had earlier admitted on Twitter that he was among the teams that rigged the platform, noting that they used a high-profit trading strategy to exploit the system. He also claimed that the technique used in the exploitation was legal in the open market.

Statement on recent events:

I was involved with a team that operated a highly profitable trading strategy last week.

— Avraham Eisenberg (@avi_eisen) October 15, 2022

Commodities Fraud and Market Manipulation 

While Eisenberg claimed the trading method was legal, he has now been charged with commodity fraud and manipulation. The charges could see punishments ranging from fines to prison time. 

A deposition signed by Brandon Racz, a Special Agent with the United States Federal Bureau of Investigation (FBI), alleged that Eisenberg “willfully and knowingly” exploited the sale of a commodity such as futures contracts on Mango Markets.

“Eisenberg engaged in a scheme involving the intentional and artificial manipulation of the price of perpetual futures contracts on a cryptocurrency exchange called Mango Markets, and other manipulative and deceptive devices and contrivances,” said Special Agent Racz.

Meanwhile, the high-profit trading strategy used by Eisenberg has been tied to other high-profile attacks, including the $34 million loss suffered by Harvest Finance in 2020, the $182 million hit to Beanstalk in April, and the $9 million exploit of Moola Market in October.