Mango markets as fake diamond ring scam: Prosecutors
Avraham “Avi” Eisenberg's $110 million embezzlement of Solana's decentralized mango market was no different from the fake diamond ring scam, prosecutors said.
Assistant US Attorney Tian Huang said in opening arguments in Manhattan federal court on October 11, 2022 that Eisenberg's actions constituted fraud and market manipulation, according to the April 9 Inner City Press X Post.
“Look at this scam. A man sells fake diamond rings, worthless plastic. The criminal ran away. This issue is a modern twist on that. Is that man Avraham Eisenberg? He ran.”
“In 20 minutes, they raised the price of cryptocurrency by 1,000%. He convinced Mango Markets that they had a lot and collected Mango Markets.” Huang added.
“Over $110 million in cryptocurrency has been lent,” he continued. “He wasn't actually borrowing – he was stealing. He took crypto and ran.”
Eisenberg has long denied claims that Mango exploits markets and says he is “running a very profitable business strategy” and that his actions are “legitimate open market measures.”
In court, his lawyer, Sanford Tokin, denied the claims, explaining that Eisenberg had risked $13 million of his own money and could lose it all if the business failed.
“With this trading strategy, he could have lost everything at any time. It wasn't a sure bet, and it wasn't a secret bet. The bets he made could be seen by anyone,” Tokin said.
The exploitation of the Mango market happened publicly, and the public nature of blockchain transactions meant that anyone could have taken the other side of the business, he added.
“If the teammates saw it and chose to, they could have traded him,” Tokin said. “He did a successful business.”
In the year In October 2022, Eisenberg priced the platform's native token, MNGO, against USD Coin (USDC).
He then took out a series of loans at inflated MNGO prices, draining Mango Markets' coffers of around $110 million worth of various cryptocurrencies.
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Days later, on October 15, Mango Markets confirmed the return of $67 million in various crypto assets. Eisenberg has publicly blamed X for his actions on the crypto exchange, which he believes are legitimate and authorized by the platform's smart contracts.
While some of the money was returned, the group behind Mango Markets sued Eisenberg for $47 million in damages and interest.
Crypto lawyer weighs the results
The final decision in the Eisenberg case may be more important for the future of the crypto industry than the criminal trial for Sam Bankman-Fried, crypto attorney Gabriel Shapiro said in an April 9 X Post.
Shapiro Eisenberg, general counsel for Delphi Labs, says he is “fine” with government charges that he committed market manipulation but allowed problems surrounding Eisenberg's requirements.
“The problematic claim against AV is that the use of the protocol violates some kind of credit agreement – this is nonsense. [and] That's not how DeFi works,” Shapiro wrote.
“Imagine you have liquidity on Aave, but the network is congested, the value of your securities has fallen dramatically and the protocol has incurred bad debt – do you want AaveDAO to sue you to collect the debt?”
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