DeFi Protocol Mango Markets Manipulator Is Arrested

The United States prosecutors have arrested Avraham Eisenberg, who admitted to draining decentralized finance (DeFi) protocol Mango Markets with his “highly profitable trading strategy.” According to a court filing, he was arrested on Monday in Puerto Rico.

Avraham Eisenberg of DeFi Protocol Mango Markets Arrested

Eisenberg manipulated the DeFi protocol in mid-October. He used two accounts and sold a large number of perpetual contracts of Mango’s crypto token MNGO from one of his accounts to the other, thus artificially inflating the price by 1,300 percent in under an hour. He then used the token as collateral to borrow from Mango Markets $110 million in other cryptocurrencies and quickly withdrew the funds. In doing so, he essentially withdrew all the cryptocurrencies deposited on the DeFi platform.

“Eisenberg engaged in a scheme involving the intentional and artificial manipulation of the price of perpetual futures contracts on a cryptocurrency exchange called Mango Markets, and other manipulative and deceptive devices and contrivances,” a deposition signed by FBI Special Agent, Brandon Racz alleged.

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The Settlement with DeFi Protocol Mango Markets

Moreover, he admitted to his involvement in draining the DeFi protocol only after a week of manipulation. However, he believed his actions to be “legal” in the open markets.

I believe all of our actions were 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.

He even pointed out that his actions made Mango Markets insolvent, leading to customers being unable to use their funds. Later, he negotiated a settlement with Mango Markets and agreed to return $67 million to the decentralized autonomous organization (DAO) governing the protocol.

“All mango depositors will be made whole,” a community post of Mango Markets stated after the settlement, adding that the protocol developers will not “pursue any criminal investigations or freezing of funds once the tokens are sent back.”

Eisenberg is now facing charges of commodities fraud and commodities manipulation. Furthermore, he might face prison time and a monetary penalty if found guilty. Also, it is the first legal action by US enforcement against an individual for manipulating a DeFi protocol.