Crypto trader Avraham “Avi” Eisenberg has been convicted on all counts of fraud and manipulation in a $110 million cryptocurrency trading scheme involving the Mango Markets platform. This landmark verdict marks the first instance where a U.S. jury has assessed the applicability of existing laws on fraud and market manipulation within the decentralized finance (DeFi) sphere.
Eisenberg, 28, was found guilty for actions taken on October 11, 2022, when he deliberately executed trades to inflate the price of Mango Markets’ native token, MNGO, and futures contracts. Exploiting the inflated futures holdings as collateral, Eisenberg borrowed additional cryptocurrencies on the platform, subsequently withdrawing these assets and abandoning his collateral.
Throughout the trial, Eisenberg did not dispute the facts of his trading strategy but argued its legality under the DeFi protocol, invoking the principle known as “code is law.” Prosecutors characterized Eisenberg’s actions as deception, emphasizing during closing arguments that he manipulated the market by fabricating trades of MNGO to inflate the value of futures contracts, ultimately pilfering assets from the platform.
Assistant US Attorney Peter Davis described Eisenberg’s conduct as “old-fashioned manipulation and fraud,” alleging that he pumped prices and deceived to facilitate the misappropriation of funds. In contrast, Eisenberg’s defense attorney, Brian Klein, maintained that his client’s trading strategy was legal and compliant with the smart contracts governing the decentralized platform. Klein highlighted the risk disclaimer provided by Mango Markets, asserting that Eisenberg had acted within the parameters outlined by the platform.
The trial, commencing last week, marks a pivotal moment as it represents the first instance where a U.S. jury deliberates on allegations of market manipulation within the cryptocurrency space. Prosecutors argued that traditional criminal laws apply, while the defense contended that Eisenberg adhered to the rules of the exchange, which lacked comparable safeguards to traditional financial markets.