US Secures Conviction in First Crypto Market Manipulation Case

The US Department of Justice (DoJ) has secured its first conviction for market manipulation in cryptocurrencies after a New York jury found Avraham Eisenberg guilty of wire fraud and manipulation charges associated with activity on the now-defunct Mango markets decentralised exchange.

Eisenberg was accused of “oracle manipulation”, enabling him to make $110 million by influencing the price on three other exchanges, data from where set the price on Mango Markets. He established two separate trading accounts on Mango, enabling him to “wash” trade between the two.

Using the Mango platform, which allowed traders to lend, borrow and swap cryptocurrencies for leverage, the prosecution argued that Eisenberg traded in the mango token MNGO, and the USD Coin stablecoin. Doing this, he managed to drive the value of his contracts up by 1300%, which he then used to borrow against, allowing him to withdraw around $100 million.

When his activity was discovered, he agreed to return $67 million to Mango Markets in return for avoiding prosecution by the firm, however the US authorities – specifically, the Commodity Futures Trading Commission, joined with the DoJ to file charges at the start of 2023.

“Avraham Eisenberg executed a manipulative trading scheme on a cryptocurrency exchange, defrauding the exchange and its investors out of $110 million,” says principal deputy assistant attorney general Nicole Argentieri, head of the Justice Department’s Criminal Division. “Manipulative trading puts our financial markets and investors at risk. This prosecution – the first involving the manipulation of cryptocurrency through open-market trades – demonstrates the Criminal Division’s commitment to protecting US financial markets and holding wrongdoers accountable, no matter what mechanism they use to commit manipulation and fraud.”

Eisenberg is scheduled to be sentenced on July 29 and faces a maximum penalty of 10 years in prison on the commodities fraud count and the commodities manipulation count, and a maximum penalty of 20 years in prison on the wire fraud count. His legal team told reporters outside the court that they will challenge the prosecution.