A federal jury in New York, United States on Thursday convicted crypto trader, Avraham “Avi” Eisenberg of commodities fraud, commodities market manipulation, and wire fraud in connection with the manipulation on the Mango Markets decentralized cryptocurrency exchange.
According to court documents and evidence presented at trial, 28-year-old Eisenberg, who is resident in Puerto Rico, engaged in a scheme to fraudulently obtain approximately $110 million worth of cryptocurrency from Mango Markets and its customers by artificially manipulating the price of certain perpetual futures contracts.
On October 11, 2022, Eisenberg was said to have intentionally made a series of trades which boosted the price of Mango Markets’ native token, MNGO, as well as the price of futures contracts.
He was said to have used the inflated futures holdings as collateral to borrow other cryptocurrencies on the platform, then quickly withdrew those assets and walked away from his collateral.
At trial, Eisenberg did not dispute the facts of the strategy but contended that what he did was legal and permitted by the decentralized finance (DeFi) protocol, a principle in the industry known as “code is law.”
His trial was the first known test for a jury to decide whether existing U.S. laws governing fraud and market manipulation apply to the world of DeFi.
Eisenberg is scheduled to be sentenced on July 29 and faces a maximum penalty of 1 years in prison on the commodities fraud count and the commodities manipulation count, and a maximum penalty of 20 years in prison on the wire fraud count.
A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
Head of US Department of Justice (DoJ)’s Criminal Division, Nicole M. Argentieri, said, “Avraham Eisenberg executed a manipulative trading scheme on a cryptocurrency exchange, defrauding the exchange and its investors out of $110 million.
“Manipulative trading puts our financial markets and investors at risk. This prosecution—the first involving the manipulation of cryptocurrency through open-market trades—demonstrates the Criminal Division’s commitment to protecting U.S. financial markets and holding wrongdoers accountable, no matter what mechanism they use to commit manipulation and fraud.”
U.S. Attorney for the Southern District of New York, Damian Williams, said, “Moments ago, Avraham Eisenberg was found guilty by a unanimous jury in the first-ever cryptocurrency market manipulation case.
“This ground-breaking prosecution epitomizes this office’s ability to employ innovative methods and cutting-edge law enforcement tools to continue to protect all financial markets. The career prosecutors of this office continue their expertise in prosecuting financial fraud, one of our core priorities, and would-be financial criminals should think twice before daring to engage in illicit conduct on our watch.”
Timothy Langan of the FBI’s Criminal, Cyber, Response, and Services Branch said, “The FBI and its partners will not stand by when criminals engage in illicit activity at the expense of the American people and our financial institutions.
“If you engage in fraudulent activity, whether that be in the cryptocurrency space or through other forms of market manipulation, you will be held accountable for your ill-gotten gains.”