CFTC takes Mango Markets manipulator to court

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The United States Commodity Futures Trading Commission (CFTC) has charged the Mango Markets manipulator with fraud and market manipulation.

In the latest chapter of the Mango Markets saga, Monday saw the CFTC bring manipulation charges against Avraham “Avi” Eisenberg, who last October used an exploit in the platform to drain $110 million in digital assets from the exchange.

The lawsuit alleges Eisenberg violated the Commodities Exchange Act and CFTC regulations by engaging in “fraudulent and manipulative acts” to artificially inflate the price of swaps offered by Mango Markets—something Eisenberg himself admitted to but claimed was “legal open market actions, using the protocol as designed.”

The CFTC disagrees and states in its filing that “contrary to his purported belief that his actions were legal, in fact, they constituted blatant manipulation of spot prices and swaps.”

This move by the regulator comes just a few weeks after Eisenberg was arrested in Puerto Rico by the U.S. Department of Justice (DOJ) on similar market manipulation charges.

The Mango drain

Solana-based exchange Mango Markets is governed by a decentralized autonomous organization (DAO) made up of holders of its native token, MNGO, allowing investors to lend, borrow, swap, and use leverage to trade digital currency.

On October 11, 2022, the project was exploited to the tune of $110 million, with Mango Markets tweeting at the time that the offender had manipulated the platform’s price oracle, leading to “a total draining of all equity.”

Around 22:00 UTC October 11th the 🥭 protocol had an incident involving the following:

-2 accounts funded with USDC took an outsized position in MNGO-PERP

-Underlying MNGO/USD prices on various exchanges (FTX, Ascendex) experienced a 5-10x price increase in a matter of minutes

— Mango (@mangomarkets) October 12, 2022

In an unusual turn of events, on October 15, Eisenberg revealed himself as the attacker but maintained that his actions were just a profitable and legal trading strategy.

He later proposed a deal in which he would return $67 million if Mango Markets agreed not to pursue any criminal investigations against him, and he would keep the rest of the $110 million drained as a “bug bounty.”

The platform agreed to the deal as part of its attempt to compensate users negatively affected by the attack, meaning its hands would be tied from pursuing further recourse against Eisenberg.

However, regulators and authorities are under no such restrictions and have moved quickly to bring charges against Mango’s manipulator.

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.