Avraham Eisenberg, 28, has been convicted on charges brought by the Department of Justice (DOJ) related to manipulation of assets on the Mango Markets decentralized cryptocurrency exchange. A federal jury in New York convicted him on grounds of commodities fraud, commodities market manipulation, and wire fraud.
According to the court documents, Eisenberg fraudulently gained about $110m in crypto assets from Mango Markets and its customers by artificially manipulating the price of certain perpetual futures contracts.
“Avraham Eisenberg was found guilty by a unanimous jury in the first-ever cryptocurrency market manipulation case,” said US Attorney Damian Williams for the Southern District of New York. He called it a “ground-breaking prosecution”.
“This prosecution – the first involving the manipulation of cryptocurrency through open-market trades – demonstrates the Criminal Division’s commitment to protecting US financial markets and holding wrongdoers accountable, no matter what mechanism they use to commit manipulation and fraud,” added Principal Deputy Assistant Attorney General Nicole M Argentieri, head of the Justice Department’s Criminal Division.
Sentencing is scheduled for July 29. Eisenberg faces a maximum penalty of 10 years in prison on the commodities fraud and commodities manipulation count, and 20 years in prison for wire fraud.
He was arrested and jailed in a federal prison in Puerto Rico on December 26, 2022.
CFTC charges in January 2023
He was charged by both the CFTC and SEC in January 2023. On January 9, the CFTC filed a civil enforcement action charging him with fraudulently and manipulatively gaining over $110m in digital assets from the Mango Markets exchange.
Eisenberg was alleged to have unlawfully misappropriated the assets through so called “oracle manipulation” in which he leveraged positions in a swap contract of MNGO, the “native” token of Mango Markets, and USDC, a stablecoin.
He then artificially pumped up the MNGO price by rapidly purchasing large quantities of it on three digital asset exchanges.
“Avraham Eisenberg was found guilty by a unanimous jury in the first-ever cryptocurrency market manipulation case.”
US Attorney Damian Williams for the Southern District of New York
This spiked the price of MNGO over 13-fold, and Eisenberg was able to illicitly withdraw over $110m in crypto from the exchange – draining it of most of its assets. In an attempt to evade liability, Eisenberg returned about $67m of the assets back to the exchange, yet kept $47m.
This was the CFTC’s first enforcement action regarding a fraudulent or manipulative scheme for trading on digital asset platform, and the first around “oracle manipulation.”
With the charges, the CFTC seeks, among other reliefs, civil monetary penalties, disgorgement of any ill-gotten gains, restitution, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA).
“The CFTC will use all available enforcement tools to aggressively pursue fraud and manipulation regardless of the technology that is utilized,” said Acting Director of Enforcement Gretchen Lowe. “The CEA prohibits deception and swap manipulation, whether on a registered swap execution facility or on a decentralized blockchain-based trading platform.”
Stolen assets of $116m in SEC charges
Then on January 20, the SEC announced its own charges for orchestrating the attack on Mango Markets. The Commission said the stolen digital assets were worth about $116m.
“As we allege, Eisenberg engaged in a manipulative and deceptive scheme to artificially inflate the price of the MNGO token, which was purchased and sold as a crypto asset security, in order to borrow and then withdraw nearly all available assets from Mango Markets, which left the platform at a deficit when the security price returned to its pre-manipulation level,” said David Hirsch, Chief of the Crypto Assets and Cyber Unit.
The SEC’s complaint charges Eisenberg with violating anti-fraud and market manipulation provisions of the securities laws. It seeks permanent injunctive relief, a conduct-based injunction, disgorgement with prejudgment interest, and civil penalties.
