By
Steve Muchoki
April 25th, 2024
The US CFTC believes Eisenberg manipulatively inflated the value of his swap contract holdings on Mango Markets to borrow a significant amount of digital assets that he had no intention to repay.
The United States Commodity Futures Trading Commission (CFTC) has filed charges against Avraham Eisenberg – the trader who exploited decentralized crypto exchange Mango Markets for over $100 million last year – in the southern district of New York. According to the court filings, the CFTC has accused Eisenberg of engaging in a manipulative and deceptive scheme to artificially inflate the price of swaps offered by Mango Markets between October 11, 2022, and October 15, 2022.
In his defense, Eisenberg noted that he was involved with a team that operated a highly profitable trading strategy, which later returned over $67 million to the Solana-based DeFi.
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
Nonetheless, the US CFTC believes Eisenberg manipulatively inflated the value of his swap contract holdings on Mango Markets to borrow a significant amount of digital assets that he had no intention to repay.
“Defendant accomplished this scheme by manipulating the price of MNGO and, ultimately, the price of MNGO-USDC Swaps, through a type of scheme often referred to as oracle manipulation,” the CFTC noted.
The CFTC court charges further added that the value of Eisenberg’s collateral was an illusion of his manipulation, which caused the price of MNGO to skyrocket 13-fold in less than thirty minutes. After the MNGO price quickly deflated, the CFTC noted that Mango Markets was left holding a mostly empty bag.
Currently, Eisenberg is determined following a ruling by Bruce McGiverin, a judge at the Puerto Rico District Court, that the defendant possesses flight risks. Moreover, Eisenberg is a holder of dual citizenship including the United States.
Eisenberg’s Trades on Mango Markets and CFTC Charges
Eisenberg’s trades on Mango Markets have increased risks on decentralized financial platforms. Moreover, anyone can participate in similar wash trades and wipe out DeFi holdings. As such, DeFi platforms now have to deal with malicious attacks on multichain networks and also manipulative trades.
The CFTC and the SEC have increased their oversight of digital assets following the Terra Luna and FTX collapse last year. Moreover, over $2.2 trillion has been wiped out of the crypto market in less than twelve months.
Nonetheless, market analysts believe more oversight and regulations entering the stud cryptocurrency industry will result in more global adoption. Furthermore, mainstream adoption of digital assets including from institutional investors requires ultimate regulatory clarity to ensure investor protection.
Meanwhile, Mango Markets has been involving its DAO to vote on how to divide the cash from Eisenberg.
“Everything has to go through DAO proposals,” Daffy Durairaj, co-founder of Mango Markets, wrote in the project’s Discord. “My personal goal is to make depositors whole and that’s what I’ll aim towards. But the mix of tokens and positions everyone had might be different”.