Avraham “Avi” Eisenberg has been accused of orchestrating a $110 million scam on the Solana decentralized exchange, Mango Markets, which prosecutors likened to a fake diamond ring scheme. The United States Assistant Attorney, Tian Huang, argued in a Manhattan federal court that Eisenberg’s actions on October 11, 2022, constituted fraud and market manipulation. According to Huang, Eisenberg inflated the price of cryptocurrency by 1,000% in just 20 minutes, deceiving Mango Markets into believing he owned a substantial amount of cryptocurrency.
Huang further stated that Eisenberg borrowed over $110 million of cryptocurrency, but rather than borrowing, he was essentially stealing it. Eisenberg then absconded with the stolen crypto. However, Eisenberg has consistently denied exploiting Mango Markets, claiming that he operated a highly profitable trading strategy within the bounds of the law.
In court, Eisenberg’s lawyer, Sanford Talkin, refuted the allegations, emphasizing that Eisenberg had risked $13 million of his own funds and could have lost it all if the trade had failed. Talkin argued that Eisenberg’s trading strategy was not a sure bet and was visible to anyone. He asserted that the trade was executed successfully and that the exploit occurred openly, with blockchain transactions allowing anyone to take the opposing side of the trade.
The Mango Markets exploit took place in October 2022 when Eisenberg artificially inflated the value of the platform’s native token, MNGO, relative to USD Coin (USDC). He then obtained a series of loans based on the inflated MNGO price, depleting Mango Markets’ treasury of approximately $110 million worth of various cryptocurrencies. A few days later, Mango Markets confirmed the return of $67 million in various crypto assets. Eisenberg publicly admitted to his actions on the crypto exchange, believing them to be legal and permitted by the platform’s smart contract.
Despite the partial return of funds, the Mango Markets team filed a lawsuit against Eisenberg, seeking $47 million in damages plus interest. The outcome of Eisenberg’s case is believed to have significant implications for the future of the crypto industry, possibly surpassing the impact of the criminal trial of Sam Bankman-Fried, according to crypto lawyer Gabriel Shapiro. Shapiro, the general counsel at Delphi Labs, agrees with the charge of market manipulation against Eisenberg but takes issue with the claim that he breached a loan agreement implied in his use of the protocol. Shapiro argues that this interpretation is not in line with the functioning of decentralized finance (DeFi).
In an effort to combat crypto hacks in real-time, a group of white hat hackers called the “SEAL 911” team has been formed. Their mission is to protect the crypto industry from security breaches and fraudulent activities.