Cryptocurrency investor Avraham Eisenberg has been arrested in Puerto Rico on charges of commodities fraud and manipulation for allegedly stealing more than $100 million from decentralized finance (DeFi) protocol Mango Markets.
This marks the first time a U.S. resident has faced charges for manipulating a DeFi platform.
Eisenberg Drains $110M from Mango Markets
Recall that Eisenberg admitted that his team used a “highly profitable trading strategy” to drain Mango Markets of digital assets worth $110 million by manipulating the price of the platform’s native token, MNGO, and withdrawing almost all of the crypto deposits from the protocol.
Due to his actions, investors lost almost all of their deposits on the DeFi platform, although Eisenberg later returned about $67 million to Mango Markets.
Fraud and Manipulation Charges
Despite the refunds, the DeFi protocol eventually became insolvent, and Eisenberg now faces charges of commodities fraud and manipulation, which could result in fines or prison time.
Eisenberg was arrested on Monday, December 26. According to a criminal complaint unsealed on Tuesday, the defendant allegedly increased the price of the swaps by 1,300% before using the inflated swaps to borrow and withdraw the assets within 20 minutes.
The complaint alleges that the defendant “willfully and knowingly” manipulated the sale of a commodity – specifically, futures contracts on the DeFi protocol.
A deposition signed by FBI Special Agent Brandon Racz states that Eisenberg “engaged in a scheme involving the intentional and artificial manipulation of the price of perpetual futures contracts on a cryptocurrency exchange called Mango Markets, and other manipulative and deceptive devices and contrivances.”
Racz: Eisenberg May Have Known His Actions Were Illegal
Shortly after his attack on Mango Markets, Eisenberg said in an interview that his team’s actions were legal, and affected projects could not press charges since the exploit could not be categorized as a hack.
However, Racz noted that Eisenberg may have been aware that his actions were illegal as he left the U.S. for Israel within 24 hours after he exploited the exchange. According to the FBI agent, the Mango Markets exploiter quickly left the U.S. to avoid apprehension.
Interestingly, Mango Markets is not the only DeFi protocol Eisenberg and his team have tried to exploit. In November, the trader went after a sophisticated loophole on the DeFi platform Aave using a series of short attacks. However, the attempt failed, leading to a significant loss for the exploiter.
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