Avraham Eisenberg convicted of $110 million DEX manipulation

Avraham Eisenberg, 28, has been convicted of commodities fraud, commodities market manipulation, and wire fraud in connection with the manipulation of the Mango Markets decentralized cryptocurrency exchange.

In the first involving the manipulation of cryptocurrency through open-market trades, a federal jury in New York found Eisenberg to have 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.

Eisenberg is scheduled to be sentenced on July 29 and faces a maximum penalty of 10 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.

Avraham Eisenberg was found guilty by a unanimous jury

Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division, 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 Damian Williams for the Southern District of New York, commented: “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.”

Executive Assistant Director Timothy Langan of the FBI’s Criminal, Cyber, Response, and Services Branch, added: “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.”

MNGO token jumped over 13-fold during 30 minute-span

The U.S. citizen was arrested and detained at MDC Guaynabo, Puerto Rico, last year, and was sued by the SEC, the CFTC, and the DoJ.

Eisenberg used an account that he controlled on Mango Markets to sell a large amount of perpetual futures for MNGO tokens and used a separate account on Mango Markets to purchase those same perpetual futures. He then engaged in a series of large purchases of the thinly traded MNGO token for the purpose of artificially raising the price of MNGO token relative to the crypto asset USD Coin, according to the complaint.

The manipulative trading allowed the price of MNGO to jump over 13-fold during a 30-minute span, resulting in a temporary, artificial spike in the value of Eisenberg’s swap positions. With the increased value of his MNGO perpetual futures position, he allegedly borrowed and withdrew approximately $110 million worth of various crypto assets from Mango Markets, effectively draining all available assets from the Mango Markets platform.

At the time, Eisenberg agreed to return a portion of the misappropriated digital assets on the condition that Mango Markets agreed, among other things, to not pursue any criminal investigations or freezing of funds. He returned approximately $67 million to Mango Markets, while retaining approximately $47 million worth of various digital assets. That move didn’t work.

In 2021, Mango Markets was behind one of the largest fundraisers in the crypto ecosystem at the time. The Solana-powered decentralized exchange raised $70 million. At one point of time during the token sale, a total of $500 million in USDC was locked as investors and traders raced to get a share of the tokens. But this tapered off towards the close of the token sale as it closed at around $70 million which is still very strong for a token sale as they usually end up with only around $1 million to $15 million on average.