SEC charges Mango Markets manipulator Avraham Eisenberg with stealing $116M of digital assets

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Avraham Eisenberg has been charged by the U.S. Securities and Exchange Commission (SEC) with manipulating Mango Markets’ governance token, MNGO, to effectively steal $116 million in digital assets from the exchange.

The SEC’s complaint, filed in the federal district court in Manhattan, charges Eisenberg with violating anti-fraud and market manipulation provisions of the securities laws and seeks a reclaiming of stolen assets, as well as “civil penalties.”

When announcing the charges, the SEC’s Chief of the Crypto Assets and Cyber Unit, David Hirsch, outlined Eisenberg’s crimes as: “A manipulative and deceptive scheme to artificially inflate the price of the MNGO token, which was purchased and sold as a crypto asset security, in order to borrow and then withdraw nearly all available assets from Mango Markets, which left the platform at a deficit when the security price returned to its pre-manipulation level.”

Hirsch reiterated the regulator’s determination to prosecute bad actors in the digital asset space, stating, “as our action shows, the SEC remains committed to rooting out market manipulation, regardless of the type of security involved.”

Eisenberg was arrested and jailed in Puerto Rico last December, and the new year has not changed his fortunes. The SEC’s charges, announced in a press release on January 20, come barely a couple of weeks after the other major financial markets regulator, the Commodity Futures Trading Commission (CFTC), also charged Eisenberg with fraud and market manipulation.

Eisenberg’s Mango gamble

Mango Markets is a Solana-based exchange governed by a decentralized autonomous organization (DAO) comprised of holders of its native token, MNGO. It was through manipulating the price of this MNGO token that on October 11, 2022, the platform was drained of $110 million, leading to “a total draining of all equity,” as it tweeted at the time.

Eisenberg boldly revealed himself to be the perpetrator of this scheme but claimed that his actions were just a profitable trading strategy—something the SEC strongly disagrees with, and in its complaint, it cites Eisenberg’s admittance of his actions as evidence that “he knew, or was reckless in not knowing, he was engaged in manipulative, deceptive, and fraudulent conduct.”

In a supposed show of ‘good faith,’ Eisenberg later proposed a deal that would see him return $67 million in assets to Mango Markets, with him keeping the rest of the $110 million if the exchange agreed not to pursue criminal investigations against him.

Mango Markets agreed to the deal out of necessity to pay back some of its users affected by the attack. While this meant the exchange was unable to pursue action against Eisenberg personally, regulators and federal prosecutors have been quick to take up the investigation baton and with gusto.

A unified approach

Eisenberg is currently in custody in Puerto Rico, awaiting extradition to appear before the Southern District of New York, where he will now face similar charges of fraud and market manipulation from the Department of Justice (DOJ), the CFTC, and the SEC.

When announcing its action, the latter, the latest to bring charges in the matter, also highlighted the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation (FBI), and the CFTC in helping it bring charges against Eisenberg.

This spirit of cooperation between agencies, who have been known to wrangle over jurisdictional authority when it comes to the digital asset space, may be a sign of a more unified approach to enforcement of the industry in 2023 and beyond—and a further warning, if it were needed, to those who may be tempted to imitate Eisenberg’s self-described and ill thought-out “highly profitable trading strategy.”

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.