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DeFi Crypto Fraud Scheme Operator Faces Criminal And Regulatory Charges!

CFTC files complaint against Avraham Eisenberg
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The U.S. Commodity Futures Trading Commission (CFTC) filed a civil enforcement action charging Avraham Eisenberg with running a fraudulent and manipulative trading scheme on Mango Markets to unlawfully obtain over $110 million in crypto assets from a purported decentralized digital asset exchange. This is the CFTC’s first enforcement action for a fraudulent or manipulative scheme involving trading on a supposed decentralized crypto asset platform.  

The Scheme In A Nutshell

Avraham Eisenberg allegedly unlawfully misappropriated over $110 million in digital assets from Mango Markets, a purported decentralized crypto asset exchange, through “oracle manipulation.” He created two anonymous accounts on Mango Markets, which he used to establish large leveraged positions in a swap contract whose value was based upon the relative price of MNGO, the “native” token of Mango Markets, and USDC, a stablecoin. Eisenberg then artificially pumped up the price of MNGO by rapidly purchasing substantial quantities of MNGO on three crypto exchanges that were the inputs for the “oracle,” or data feed, that Mango Markets used to determine the value of Eisenberg’s swap positions. 

Consequently, the price of MNGO, as reported by the oracle, jumped over 13-fold during 30 minutes, resulting in a temporary, artificial spike in the value of Eisenberg’s swap positions. Eisenberg then cashed out his illicit profits by using the artificially inflated value of his swaps as collateral to withdraw over $110 million in digital assets from Mango Markets, thereby draining the platform of most of the assets that other users had deposited. Eisenberg ultimately returned approximately $67 million to Mango Markets while retaining approximately $47 million worth of digital assets.

The CFTC seeks, among other relief, civil monetary penalties, disgorgement of ill-gotten gains, restitution, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA), as charged.

The CFTC will use all available enforcement tools to aggressively pursue fraud and manipulation regardless of the technology that is utilized.

Gretchen Lowe, Acting Director of CFTC Enforcement

Arrest And Criminal Charges

The U.S. Justice Department arrested Avraham Eisenberg on 27 Dec 2022, charging him with commodities fraud and one count of commodities manipulation.

CategoriesCFTC Court Cases

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