Not so sweet
Mango Labs, the developer of the decentralized finance (DeFi) lending protocol Mango Markets, is suing Avraham Eisenberg for the $47 million he allegedly still holds from the exploit, plus damages. Mango Markets is a decentralized exchange built on the Solana blockchain.
On October 11, 2022, Eisenberg allegedly executed a malicious attack on Mango Markets by manipulating the value of the Mango token (MNGO) and fraudulently converting approximately $114 million from Mango Markets’ depositors into his own accounts.
On October 15, Eisenberg posted a thread on Twitter in which he described being “involved with a team that operated a highly profitable trading strategy.” He also claimed that he believed the exploit was carried out with “legal open market actions, using the protocol as designed.”
The lawsuit is seeking to nullify an agreement between the Mango DAO, the decentralized autonomous organization that governs the protocol, and Eisenberg that was reached in the days after the exploit. The agreement stated that Eisenberg would return $67 million of the total $114 million, and in return, the DAO would “not pursue any criminal investigations or freezing of funds once the tokens are sent back.”
The lawsuit alleges that because the Mango DAO’s $10 million insurance fund for such attacks was insufficient to cover the depositors’ losses, the DAO was forced to accept the agreement under duress.
Only one of Eisenbergs problems
Eisenberg is also facing legal scrutiny from other agencies. The Department of Justice arrested him on December 27, 2022, on charges of commodities fraud and manipulation. On January 9, the Commodity Futures Trading Commission (CFTC) brought charges against Eisenberg, indicting him on two counts of market manipulation. And last week, the Securities and Exchange Commission (SEC) also brought charges against Eisenberg, claiming that he “violated numerous provisions of the federal securities laws, including certain anti-fraud and anti-market manipulation provisions.”
This civil lawsuit from Mango Labs is in addition to the three additional cases brought by the DOJ, CFTC, and SEC. It remains to be seen how these cases will play out in court and what the outcome will be for Avraham Eisenberg.
Cyber crime doesn’t pay
Eisenberg’s case solidifies the idea that financial fraud and market manipulation are serious crimes, and the SEC is taking a zero-tolerance approach to them. It also highlights the need for regulatory oversight in the crypto industry to protect investors and prevent fraud. The SEC claims that Eisenberg “violated numerous provisions of the federal securities laws, including certain anti-fraud and anti-market manipulation provisions”.
It is important to remember that manipulating financial markets, whether it be in the traditional stock market or the digital currency market, is a crime. It is not only illegal, but it also has the potential to harm innocent investors and damage the overall market. The SEC is committed to ensuring that the markets remain fair and transparent for all investors, and it will continue to take action against those who try to cheat the system.
The world of crypto is still in its infancy and regulatory oversight is essential to protect investors and prevent fraud. Lately, there is a strong call for transparency and accountability in the industry, to ensure that customers are not left at the mercy of unscrupulous individuals and companies. The SEC’s charges against Avraham Eisenberg serve as a reminder that financial fraud and market manipulation will not be tolerated by the governmental agency, and it is a warning to all those who try to cheat the system that they will be caught and punished.