• Avraham Eisenberg was arrested in Puerto Rico on Dec. 26 on commodities fraud and manipulation charges relating to the $110 million exploit of the decentralized Mango Markets exchange.
• Eisenberg had manipulated the price of the exchange’s MNGO coin relative to the USDC (USDC) stablecoin and then took out loans against his collateral.
• U.S. Federal Bureau of Investigation special agent Brandon Racz wrote that virtual currencies, such as USDC, are “commodities” under the Commodity Exchange Act.
On December 26, 2022, Avraham Eisenberg was arrested in Puerto Rico on charges of commodities fraud and manipulation related to the $110 million exploit of the decentralized Mango Markets exchange. Eisenberg had self-identified as the actor behind a “highly profitable trading strategy” and insisted that he had taken “legal open market actions, using the protocol as designed.”
Eisenberg had manipulated the price of the exchange’s MNGO coin relative to the USDC (USDC) stablecoin and then took out loans against his collateral. U.S. Federal Bureau of Investigation special agent Brandon Racz wrote that virtual currencies, such as USDC, are “commodities” under the Commodity Exchange Act. This raised eyebrows on crypto Twitter and required some processing to work through the intricacies of the case.
Eisenberg’s arrest had repercussions beyond the crypto world. It highlighted how decentralized exchanges (DEXs) can be vulnerable to exploitation, as well as the need for greater regulatory oversight of such exchanges. This was a wake-up call for the DEX industry, as it showed that these exchanges are not immune from manipulation and other forms of fraud.
The case also showed the importance of proper risk management and due diligence when investing in digital assets. As the market for crypto assets continues to grow, investors need to be aware of the risks associated with investing in crypto. This includes understanding the legal implications of investing in crypto assets and the need for proper risk management.
The arrest of Eisenberg also serves as a reminder that crypto assets are still subject to traditional financial regulations and laws. While the crypto space has been largely unregulated thus far, this case shows that even in the absence of regulation, certain activities may still be subject to prosecution. As such, investors should be aware of the risks and implications of their investments and understand the legal implications of their actions.