CFTC Charges Avraham Eisenberg with Market Manipulation on Mango Markets

The CFTC Takes Action Against Eisenberg

On January 9, the United States Commodity Futures Trading Commission (CFTC) sprang into action, filing a lawsuit against Avraham Eisenberg, a digital artist who decided to dabble in a little market manipulation. The claim? Two counts of market trickery tied to an exploit on the decentralized finance platform, Mango Markets.

A Deep Dive Into the Allegations

The CFTC’s suit paints quite the picture, alleging that Eisenberg concocted a scheme that would make even the most seasoned Wall Street wolves raise an eyebrow. According to the filing, Eisenberg “engaged in a manipulative and deceptive scheme” to inflate the price of swaps on Mango Markets, allegedly swindling over $100 million from the platform.

How Did He Pull It Off?

Here’s how the plot thickens: Eisenberg allegedly purchased a staggering 400 million MNGO-USDC Swaps with a hefty position size of around $19 million. To make matters worse, he didn’t stop there. Eisenberg proceeded to buy large quantities of Mango’s MNGO coin across three exchanges that acted as oracles for Mango. This move drove the price up, allowing him to borrow digital assets worth an eye-popping $144 million at the inflated price. When the MNGO price inevitably plummeted, Mango Markets was left gasping for air.

A Case of Wash Transactions

The CFTC characterized Eisenberg’s actions as a method of “wash” trading. What’s a wash transaction, you ask? Well, in layman’s terms, it’s a fancy way of saying he was trading with himself to create a false sense of market demand. The CFTC noted:

“The goal of Defendant’s scheme was straightforward: to artificially inflate the value of his swap contract holdings on Mango Markets through price manipulation, so that he could ‘borrow’ a significant amount of digital assets that he had no intention to repay.”

Eisenberg’s Defense: Legal or Lame?

In a rather bold move, Eisenberg took to Twitter on October 15, declaring himself the mastermind behind the exploit. He claimed all his actions were perfectly legal open market activities, stating, “I believe all of our actions were legal open market actions, using the protocol as designed…” Strangely enough, the Mango Markets community even voted to reward him with $47 million instead of pursuing criminal charges, essentially rewarding the fox for letting the chickens go.

Justice on the Horizon?

Despite this bizarre twist of events, Eisenberg isn’t out of the woods yet. On December 27, the U.S. Justice Department swooped in and arrested him, laying charges of commodities fraud and manipulation. The CFTC moved quickly, aiming for a jury trial along with a permanent injunction against him trading commodities, civil penalties, and reimbursement of all the ill-gotten gains. Talk about a legal double whammy!