Avi Eisenberg Trial For $110 Million Fraud In Mango Markets Case To Start

Updated: 09 April 2024

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Crypto trader Avi Eisenberg’s criminal fraud trial after he crippled the decentralized Mango Markets in October 2022 will be the first prosecution of its kind in the decentralized finance (DeFi) sector.

Eisenberg is accused of illegally gaming the once popular Solana-based platform through what he’s called merely a “highly-profitable trading strategy.”

He managed to manipulate the price of the platform’s native MNGO token before effectively borrowing all of Mango’s deposits against his position. This resulted in the trader walking away with $110 million worth of crypto that other users on the platform had deposited.

Eisenberg later went on to return some of the crypto in exchange for the promise that Mango’s users would not seek his prosecution, but the platform’s supporters did not keep their promise as the trial against him is set to start on Apr. 9.

Negotiations With Mango Markets Might Been Seen As A Hostage Situation

Mango’s founder Dafydd Durairaj supposedly spoke with a ransomware negotiator for assistance in the wake of the trade, prosecutors said in court on Apr. 8. If this is true, it could suggest that the founder viewed the negotiations as a hostage situation and not an “arms-length” deal, argued the prosecutors.

We are currently investigating an incident where a hacker was able to drain funds from Mango via an oracle price manipulation.

We are taking steps to have third parties freeze funds in flight. 1/

— Mango (@mangomarkets) October 11, 2022

Judge Arun Subramanian told the government to not bring up the ransomware negotiator to mitigate the risk of jurors getting pushed in a direction early on in the case. However, if Eisenberg’s defense argues that the negotiations were in fact arm’s length, then prosecutors are free to mention it, said the judge.

A First For Federal Prosecutors

Prosecutors then sparred with Eisenberg’s defense team over the word “manipulation.” More specifically, they analyzed its presence in online terms-of-service documents and how witnesses may potentially use the word.

Phrasing on Mango Markets that mentioned what traders were “obliged” to do was also put under spotlight. The parties argued over whether this word was legally binding or only referred to the outcomes of certain transactions on a smart contract.

These arguments over trivial jargon and phrasing could warn of the complexities in the case, and will most likely test the government’s latest strategy of presenting complicated crypto trading strategies as simple fraud cases.