The US Commodity Futures Trading Commission (CFTC) brought fraud and market manipulation charges against Avraham Eisenberg, who publicly admitted his role in draining over $110 million in digital assets from decentralized crypto exchange Mango Markets.The lawsuit blamed Eisenberg for violating federal commodities law by using a “manipulative or deceptive device” to manipulate the MNGO tokens’ price through swaps. He was also accused of “manipulation of a swap.”The regulator filed the charges only two weeks after the US Department of Justice arrested Eisenberg on similar fraud and market manipulation charges. The regulator also highlighted that it is the first enforcement action for fraud and manipulation of a decentralized platform through “oracle manipulation.””The CFTC will use all available enforcement tools to aggressively pursue fraud and manipulation regardless of the technology that is utilized,” said Gretchen Lowe, Acting Director of Enforcement at CFTC. “The CEA prohibits deception and swap manipulation, whether on a registered swap execution facility or on a decentralized blockchain-based trading platform.Keep Reading The charges against Avi Eisenberg in the Mango Markets DEX case have once again highlighted important questions about the scope of commodities law in crypto, KYC req. in DEXs and the “code is law” argument. 🧵— Vasu Nigam (@vasungm) January 10, 2023 Mango Markets, which runs on the Solana Blockchain, suffered the draining of over $110 million in cryptocurrencies on 11 October 2022. A few days Eisenberg Tweeted, admitting his role in draining Mango Markets, highlighting that it was a “highly profitable trading strategy” and was “legal.”I believe all of our actions were legal open market actions, using the protocol as designed, even if the development team did not fully anticipate all the consequences of setting parameters the way they are.— Avraham Eisenberg (@avi_eisen) October 15, 2022″Contrary to his purported belief that his actions were legal, in fact, they constituted blatant manipulation of spot prices and swaps,” the CFTC stated.Mango Markets Manipulator Thought the Activities were ‘Legal’In the lawsuit, the CFTC detailed that Eisenberg created two anonymous Mango Markets accounts for selling a large number of perpetual contracts of Mango’s crypto token MNGO from one of his accounts to the other, thus artificially inflating the price by 1,300 percent in under an hour. He then used the token as collateral to borrow from Mango Markets $110 million in other cryptocurrencies and quickly withdrew the funds. In doing so, he essentially withdrew all the cryptocurrencies deposited on the DeFi platform.He later entered into a deal with Mango Markets, agreeing to return $67 million to the decentralized autonomous organization (DAO) governing the protocol with an assurance that the protocol developers will not “pursue any criminal investigations or freezing of funds once the tokens are sent back.” The CFTC is now seeing this agreement as an attempt to evade liability.The regulator is now seeking recovery of the ill-gotten funds, along with monetary penalties for the misdeeds. It is also moving for a permanent trading ban for Eisenberg.The US Commodity Futures Trading Commission (CFTC) brought fraud and market manipulation charges against Avraham Eisenberg, who publicly admitted his role in draining over $110 million in digital assets from decentralized crypto exchange Mango Markets.The lawsuit blamed Eisenberg for violating federal commodities law by using a “manipulative or deceptive device” to manipulate the MNGO tokens’ price through swaps. He was also accused of “manipulation of a swap.”The regulator filed the charges only two weeks after the US Department of Justice arrested Eisenberg on similar fraud and market manipulation charges. The regulator also highlighted that it is the first enforcement action for fraud and manipulation of a decentralized platform through “oracle manipulation.””The CFTC will use all available enforcement tools to aggressively pursue fraud and manipulation regardless of the technology that is utilized,” said Gretchen Lowe, Acting Director of Enforcement at CFTC. “The CEA prohibits deception and swap manipulation, whether on a registered swap execution facility or on a decentralized blockchain-based trading platform.Keep Reading The charges against Avi Eisenberg in the Mango Markets DEX case have once again highlighted important questions about the scope of commodities law in crypto, KYC req. in DEXs and the “code is law” argument. 🧵— Vasu Nigam (@vasungm) January 10, 2023 Mango Markets, which runs on the Solana Blockchain, suffered the draining of over $110 million in cryptocurrencies on 11 October 2022. A few days Eisenberg Tweeted, admitting his role in draining Mango Markets, highlighting that it was a “highly profitable trading strategy” and was “legal.”I believe all of our actions were legal open market actions, using the protocol as designed, even if the development team did not fully anticipate all the consequences of setting parameters the way they are.— Avraham Eisenberg (@avi_eisen) October 15, 2022″Contrary to his purported belief that his actions were legal, in fact, they constituted blatant manipulation of spot prices and swaps,” the CFTC stated.Mango Markets Manipulator Thought the Activities were ‘Legal’In the lawsuit, the CFTC detailed that Eisenberg created two anonymous Mango Markets accounts for selling a large number of perpetual contracts of Mango’s crypto token MNGO from one of his accounts to the other, thus artificially inflating the price by 1,300 percent in under an hour. He then used the token as collateral to borrow from Mango Markets $110 million in other cryptocurrencies and quickly withdrew the funds. In doing so, he essentially withdrew all the cryptocurrencies deposited on the DeFi platform.He later entered into a deal with Mango Markets, agreeing to return $67 million to the decentralized autonomous organization (DAO) governing the protocol with an assurance that the protocol developers will not “pursue any criminal investigations or freezing of funds once the tokens are sent back.” The CFTC is now seeing this agreement as an attempt to evade liability.The regulator is now seeking recovery of the ill-gotten funds, along with monetary penalties for the misdeeds. It is also moving for a permanent trading ban for Eisenberg.
