Avraham Eisenberg was arrested by the U.S. Department of Justice in Puerto Rico on December 27, 2022, and charged with fraud and manipulation.[0] The exploiter of Mango Markets, a decentralized cryptocurrency exchange, is accused of stealing around $116 million in crypto.[1] Eisenberg allegedly manipulated the MNGO token, a governance token of Mango Markets, by buying large amounts of it to raise its rate relative to USD Coin (USDC).[2]
The Securities and Exchange Commission (SEC) has accused Eisenberg of violating anti-fraud and market manipulation provisions of the securities laws and is seeking permanent injunctive relief, a conduct-based injunction, disgorgement with prejudgment interest, and civil penalties.[3] Mango Labs, the firm behind Mango Markets, has also filed a lawsuit against Eisenberg, seeking approximately $47 million in damages.[4]
The SEC noted that despite MNGO’s labeling as a “governance token,” it “was purchased and sold as a crypto asset security.”[5] Holders of the investment anticipated returns on their investment and could be considered to have engaged in a collective venture, two of the elements the SEC takes into account when determining whether a particular contract is subject to securities regulations.[5] Holders of MNGO tokens are able to vote in decisions that pertain to the operations of Mango Markets, the agency announced.[5]
Eisenberg attempted to exploit another DeFi protocol, Aave, with a series of sophisticated shorts on November 22.[6] Following the scam, Eisenberg returned $67 million to Mango Markets in an attempt to cut a deal with the decentralized exchange, asking that no criminal investigations would be pursued.[7]
The court document also alleges that Eisenberg “forced Mango DAO to enter into an unenforceable settlement agreement – under duress – purporting to release depositors’ claims against him and precluding them from pursuing a criminal investigation.”[8] Mango Labs is asking the court to declare the agreement invalid and unenforceable.
The SEC’s move is similar to its arguments in prior actions, which have put the crypto industry on high alert.[6] David Hirsch, chief of the crypto assets and cyber unit, has stated that the SEC “remains committed to rooting out market manipulation, regardless of the type of security involved.[9]
0. “Mango Labs v Eisenberg: Crypto Exchange Sues Its Hacker” Bitcoinist, 26 Jan. 2023, https://bitcoinist.com/mango-labs-v-eisenberg-crypto-exchange-its-hacker
1. “Mango Manipulator Charged with Stealing $116M” BanklessTimes, 21 Jan. 2023, https://www.banklesstimes.com/news/2023/01/21/mango-manipulator-charged-with-stealing-dollar116m
2. “SEC charges Mango Markets exploiter for allegedly stealing $116M in crypto By Cointelegraph” Investing.com, 22 Jan. 2023, https://www.investing.com/news/cryptocurrency-news/sec-charges-mango-markets-exploiter-for-allegedly-stealing-116m-in-crypto-2985381
3. “US Authorities Charge Mango Markets Attacker — Defendant Arrested, Detained in Puerto Rico – Regulation Bitcoin …” Bitcoin News, 23 Jan. 2023, https://news.bitcoin.com/us-authorities-charge-mango-markets-attacker-defendant-arrested-detained-in-puerto-rico/
4. “Mango Markets exploiter sued by crypto exchange after $114M theft” Seeking Alpha, 26 Jan. 2023, https://seekingalpha.com/news/3928510-mango-markets-exploiter-sued-by-crypto-exchange-after-114m-theft
5. “SEC Sues Eisenberg for Draining Mango Markets, Alleges MNGO a Security” Yahoo News, 20 Jan. 2023, https://news.yahoo.com/sec-sues-eisenberg-draining-mango-194430194.html
6. “Mango Labs goes after Avraham Eisenberg for $47M – Cryptopolitan” Cryptopolitan, 26 Jan. 2023, https://www.cryptopolitan.com/mango-labs-sues-avraham-eisenberg-for-47m/
7. “Avraham Eisenberg Charged By SEC With Manipulating Mango Markets Token | Crowdfund Insider” Crowdfund Insider, 22 Jan. 2023, https://www.crowdfundinsider.com/2023/01/201439-avraham-eisenberg-charged-by-sec-with-manipulating-mango-markets-token/
8. “Mango Labs Sues Avraham Eisenberg to Recover $47 Million” BeInCrypto, 26 Jan. 2023, https://beincrypto.com/mango-labs-sues-avraham-eisenberg-recover-47-million
9. “Mango Market Manipulator Apprehended By SEC” The Coin Republic, 23 Jan. 2023, https://www.thecoinrepublic.com/2023/01/23/mango-market-manipulator-apprehended-by-sec/