CFTC Charges Mango Markets Manipulator with Fraud

Tuesday, 10/01/2023 | 05:29 GMT by Arnab Shome
  • It is the first regulatory enforcement action for decentralization platform manipulation.
  • The defendant is already facing criminal charges brought by the DoJ.
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The US Commodity Futures Trading Commission (CFTC) brought fraud and market manipulation charges against Avraham Eisenberg, who publicly admitted his role in draining over $110 million in digital assets from the decentralized crypto exchange, Mango Markets.

CFTC Charges Mango Markets Manipulator

The lawsuit blamed Eisenberg for violating federal commodities law by using a "manipulative or deceptive device" to influence the MNGO tokens' price through swaps. He was also accused of "manipulation of a swap."

The regulator filed the charges only two weeks after the US Department of Justice arrested Eisenberg on similar fraud and market manipulation charges. Additionally, the regulator highlighted that it is the first enforcement action for fraud and manipulation of a decentralized platform through "oracle manipulation."

"The CFTC will use all available enforcement tools to aggressively pursue fraud and manipulation regardless of the technology that is utilized," said Gretchen Lowe, the Acting Director of Enforcement at CFTC. "The CEA prohibits deception and swap manipulation, whether on a registered swap execution facility or on a decentralized blockchain-based trading platform."

Mango Markets, which runs on the Solana Blockchain, was drained of over $110 million in cryptocurrencies on 11 October 2022. A few days Eisenberg Tweeted, admitting his role in draining Mango Markets, highlighting that it was a "highly profitable trading strategy" and was "legal."

"Contrary to his purported belief that his actions were legal, in fact, they constituted blatant manipulation of spot prices and swaps," the CFTC stated.

Mango Markets Manipulator Thought the Activities Were ‘Legal’

In the lawsuit, the CFTC detailed that Eisenberg created two anonymous Mango Markets accounts for selling a large number of perpetual contracts of Mango's crypto token MNGO from one of his accounts to the other, thus artificially inflating the price by 1,300 percent in under an hour. He then used the token as collateral to borrow from Mango Markets $110 million in other cryptocurrencies and quickly withdrew the funds. In doing so, he essentially withdrew all the cryptocurrencies deposited on the DeFi platform.

He later entered into a deal with Mango Markets, agreeing to return $67 million to the decentralized autonomous organization (DAO) governing the protocol with an assurance that the protocol developers will not "pursue any criminal investigations or freezing of funds once the tokens are sent back." The CFTC is now seeing this agreement as an attempt to evade liability.

Presently, the regulator is seeking recovery of the ill-gotten funds, along with monetary penalties for the misdeeds. Moreover, it is moving for a permanent trading ban on Eisenberg.

The US Commodity Futures Trading Commission (CFTC) brought fraud and market manipulation charges against Avraham Eisenberg, who publicly admitted his role in draining over $110 million in digital assets from the decentralized crypto exchange, Mango Markets.

CFTC Charges Mango Markets Manipulator

The lawsuit blamed Eisenberg for violating federal commodities law by using a "manipulative or deceptive device" to influence the MNGO tokens' price through swaps. He was also accused of "manipulation of a swap."

The regulator filed the charges only two weeks after the US Department of Justice arrested Eisenberg on similar fraud and market manipulation charges. Additionally, the regulator highlighted that it is the first enforcement action for fraud and manipulation of a decentralized platform through "oracle manipulation."

"The CFTC will use all available enforcement tools to aggressively pursue fraud and manipulation regardless of the technology that is utilized," said Gretchen Lowe, the Acting Director of Enforcement at CFTC. "The CEA prohibits deception and swap manipulation, whether on a registered swap execution facility or on a decentralized blockchain-based trading platform."

Mango Markets, which runs on the Solana Blockchain, was drained of over $110 million in cryptocurrencies on 11 October 2022. A few days Eisenberg Tweeted, admitting his role in draining Mango Markets, highlighting that it was a "highly profitable trading strategy" and was "legal."

"Contrary to his purported belief that his actions were legal, in fact, they constituted blatant manipulation of spot prices and swaps," the CFTC stated.

Mango Markets Manipulator Thought the Activities Were ‘Legal’

In the lawsuit, the CFTC detailed that Eisenberg created two anonymous Mango Markets accounts for selling a large number of perpetual contracts of Mango's crypto token MNGO from one of his accounts to the other, thus artificially inflating the price by 1,300 percent in under an hour. He then used the token as collateral to borrow from Mango Markets $110 million in other cryptocurrencies and quickly withdrew the funds. In doing so, he essentially withdrew all the cryptocurrencies deposited on the DeFi platform.

He later entered into a deal with Mango Markets, agreeing to return $67 million to the decentralized autonomous organization (DAO) governing the protocol with an assurance that the protocol developers will not "pursue any criminal investigations or freezing of funds once the tokens are sent back." The CFTC is now seeing this agreement as an attempt to evade liability.

Presently, the regulator is seeking recovery of the ill-gotten funds, along with monetary penalties for the misdeeds. Moreover, it is moving for a permanent trading ban on Eisenberg.

About the Author: Arnab Shome
Arnab Shome
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About the Author: Arnab Shome
Arnab is an electronics engineer-turned-financial editor. He entered the industry covering the cryptocurrency market for Finance Magnates and later expanded his reach to forex as well. He is passionate about the changing regulatory landscape on financial markets and keenly follows the disruptions in the industry with new-age technologies.
  • 6528 Articles
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