US charges crypto trader with fraud in Mango Markets case

US prosecutors have filed criminal charges against a cryptocurrency trader accused of attempting to steal more than $100mn from the Mango Markets exchange, as authorities step up their clampdown on digital asset markets.

Late on Tuesday authorities for the Southern District of New York said they had filed charges of commodities fraud and commodities manipulation against Avraham Eisenberg for allegedly helping to artificially inflate futures prices linked to Mango’s own token in October.

Eisenberg was arrested in Puerto Rico on December 26, according to a separate court filing made by US attorney Damian Williams.

The charges round off a year of unprecedented controversy for crypto markets. The collapse in prices of popular tokens such as bitcoin has wiped more than $2tn of value from the market and forced many big names into bankruptcy. In November, the industry was rocked to the core when FTX — a former marquee crypto brand — went bankrupt. Sam Bankman-Fried’s top associates pleaded guilty to criminal charges in the US.

Eisenberg’s charges represent a step up by US authorities in the world of decentralized finance, in which networks have no central decision-making authority. Instead, many networks rely on a consensus among members and automate the network’s rules in computer code.

In October Mango, a decentralized marketplace, said it had been hacked for more than $100mn and the incident had drained all of its available equity.

US authorities alleged Eisenberg used two accounts on Mango to artificially inflate the price of Mango perpetual swaps, a type of futures contract. In about 20 minutes Eisenberg inflated the price of MNGO perpetuals by 1,300 percent, the complaint alleged. Eisenberg did not immediately respond to a request for comment.

“Because Mango Markets allows investors to borrow and withdraw cryptocurrency based on the value of their assets on the platform, the increase in the value of the MNGO perpetuals Eisenberg had purchased allowed Eisenberg to borrow, then withdraw, approximately $110mn worth of various cryptocurrencies. . . which came from deposits of other investors,” said Brandon Racz, an agent at the FBI, in the filing.

Shortly after the incident, Eisenberg wrote on Twitter that he was involved with a team that operated a “highly profitable trading strategy”. He added that he believed “all our actions are legal open market actions, using the protocol as designed, even if the development team did not fully anticipate all the consequences of setting parameters the way they are”.

Eisenberg also said he had negotiated a settlement with Mango’s insurance fund to help refund users and recapitalize the exchange. Mango received $67mn in return, US prosecutors alleged.

Racz alleged that Eisenberg flew from the US to Israel the day after his trade. “Based on the timing of the flight, the trip appears to have been an effort to avoid apprehension by law enforcement in the immediate aftermath of the market manipulation scheme,” he said.

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