A 12-person jury has been tasked with deciding whether the actions of crypto trader Avraham “Avi” Eisenberg on Mango Markets in October 2022 were legitimate or fraudulent, Bloomberg reported. His trades made him a total of $110 million.
On April 17, the jury heard prosecutors’ closing arguments. Eisenberg was arrested in Puerto Rico in December 2022 and charged with wire fraud, commodities manipulation, and commodities fraud in connection with the Mango Markets attack.
Eisenberg’s mother and two other relatives attended the proceedings. His defense team declined to call him to the stand despite suggesting he might testify earlier. The jury will deliberate and issue a final verdict in the two-week trial, which might happen as soon as today.
Eisenberg, who has been in custody since January 2023, faces up to 20 years in prison if found guilty.
A profitable trade or a crime?
In October 2022, Eisenberg told journalist Laura Shin he had merely executed a profitable trading strategy and discussed the issue of the code of the Mango platform and in general. He said that in some cases, the code simply doesn’t work “as intended,” and other times, it does, but the effect is undesirable.
Loans are provided based on the token’s actual price, and its volatility is not intended. Platforms have different rules for determining the price. Sometimes, they take the instant price, and sometimes, the average.
Lack of expertise
The only expert witness for the defense was Jeremy Sheridan, a former Secret Service agent who has become a crypto consultant. He talked about the mechanisms that allowed Eisenberg to trade as he did and why it was hard to understand whether his borrowing was actually borrowing. The judge ended up throwing out a lot of his testimony after determining the expert didn’t have sufficient expertise when it came to Mango Markets’ codebase.
What happened?
Prosecutors claim Eisenberg engaged in market manipulation. He traded a huge amount of MNGO (Mango Markets’ native token) perpetual futures contracts between his own accounts and pumped the price by more than 1000%. With the newfound collateral, he tricked the unlucky Mango into letting him drain $110 million in different digital assets through its “borrow” function. According to prosecutors, Eisenberg was stealing, not borrowing.
MNGO is currently trading for $0.029, down from its all-time high of $0.46 in 2021.
He returned more than half the money
A few hours after the trade, Eisenberg made Mango Markets DAO an anonymous proposal in which he offered to return $67 million. Allegedly, he wanted the DAO to promise not to pursue criminal charges.
Why did he offer to return it? He says he wanted to ensure everyone could withdraw even though the platform was technically insolvent. Shin asked why he hadn’t warned users that there was something in the code that could let someone profit at everyone else’ expense. He replied he was looking at trades and arbitrages, while people who gave such warnings were looking at exploits.
When asked to confirm earlier reports that he had wanted to retain profit of $47 million, he said “it’s a bit more complicated than that.”
Defense insists his actions were compliant
Eisenberg’s attorneys did not dispute the facts of the case. Brian Klein, Eisenberg’s lead attorney, tried to portray his client’s lucrative trades as part of a legal and successful trading strategy that was fully compliant with the Mango Markets protocol. Klein said that Mango did not have any Terms of Use when Eisenberg conducted his trades, maintaining that he simply used Mango as intended and made a lot of money in the process.
His defense team insisted he wanted to return the funds and he did return part of them, $67 million. They said that’s how things were done “in the world of cryptocurrency” and their client only retained the profits.
Klein is a well-known crypto defense attorney. Tornado Cash developer Roman Storm is one of his current clients.
A victim of hate and jealousy
In October 2022, Eisenberg said that all profitable trades attract hate and jealousy, citing Sam Bankman-Fried as an example. He also cited ticket scalpers as people who attract hate because they make money. However, prosecutors insist he knew what he was doing was illegal. Before the Mango trades, he had taken someone to court for allegedly manipulating the WAVES token price. He also searched for “elements of fraud” and similar phrases online before his actions in October 2022.
After the actions and the subsequent exposure of his identity, he bought a ticket for a flight to Israel. He searched for a “list of Israel extraditions,” “FBI surveillance,” and “Otisville,” a federal prison for white-collar crimes. According to prosecutors, these actions show he knew he had committed a crime.
Did he flee?
According to Klein, angry Mango Markets customers were threatening his client, which is why he bought the ticket. As Mango had frozen all of Eisenberg’s funds, he sued Circle to get them back. He also returned to the US willingly, which showed that he did not believe he had acted with criminal intent, according to his attorney.
Prosecutors rebuffed these claims, saying that Eisenberg tried to get his money back only after his identity had been revealed. He returned to the US because he thought his proposal to Mango Markets’ DAO had released him from liability.
Eisenberg faces criminal as well as civil charges. Both the Commodity Futures Trading Commission and the US Securities and Exchange Commission have brought civil action cases against him. These have been suspended pending conclusion of the criminal trial.
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