A 27-year-old US national, Avraham Eisenberg, faces up to 40 years imprisonment following allegations of committing fraud and obtaining $110 million worth of cryptocurrency from Mango Markets and its customers.
Eisenberg, who resided in Puerto Rico at the time of the alleged crime, has been charged with one count each of commodities fraud, commodities manipulation, and wire fraud.
Eisenberg has been held by the police since February 2nd and is scheduled to be formally charged on February 14th, at which time he will be asked to plead to the charges. His legal representation, Brian Klein of the law firm Waymaker, is in discussions with the prosecutors to secure a bail package.
In January, the Securities and Exchange Commission and the Commodity Futures Trading Commission brought parallel civil charges against Eisenberg. The CFTC, responsible for overseeing the derivatives market, stated that this enforcement action against Eisenberg marks the first time it has taken action against an alleged manipulation scheme involving a decentralized exchange.
Mango Markets is governed by the Mango Decentralized Autonomous Organization (DAO) and utilizes its own cryptocurrency, MANGO, which can be bought and sold by investors. Eisenberg is facing allegations of manipulating the value of MANGO perpetuals contracts, a type of futures contract commonly used in the cryptocurrency industry.
He allegedly achieved this by selling massive amounts of MANGO perpetuals to himself, causing a rapid increase in the price of the contracts by an estimated 1300% within an hour.
He is said to have artificially inflated the value of MANGO on three digital asset exchanges that Mango Markets relied on to evaluate its derivative contracts.
With the increased value of his MANGO futures positions, Eisenberg is alleged to have borrowed and withdrawn approximately $110 million worth of various digital assets from Mango Markets, resulting in the depletion of most of the assets that other users had deposited on the platform.
As alleged, Avraham Eisenberg manipulated the Mango Markets cryptocurrency exchange in order to obtain over $100m in illicit profits for himself, said US attorney Damian Williams for the Southern District of New York.
Through his scheme, Eisenberg left others holding the bag. Market manipulation is illegal in all of its forms, and this office is committed to prosecuting such schemes wherever they occur – including the cryptocurrency markets. he added.
In addition to the criminal charges, Eisenberg is also facing a complaint from the SEC for alleged securities law violations. The regulator is pursuing civil penalties as well as seeking permanent injunctive relief, a conduct-based injunction, and disgorgement with prejudgment interest.