Digital Artist Avraham Eisenberg Charged With Crypto Market Manipulation By CFTC

The U.S. Commodity Futures Trading Commission (CFTC) charged the self-proclaimed digital artist Avraham Eisenberg on Jan. 9 with two counts of market manipulation in relation to an exploit on the decentralized finance platform Mango Markets.

Eisenberg was charged on a related issue on Dec. 27 by the U.S. Attorney’s Office for the Southern District of New York with commodities fraud and commodities manipulation. Eisenberg remains in custody.

What Happened: According to the CFTC, Eisenberg "engaged in a manipulative and deceptive scheme to artificially inflate the price of swaps offered by Mango Markets" which resulted in "the misappropriation of over $100 million from the platform" in October.

The CFTC also said Eisenberg's goal was to "artificially inflate the value of his swap contract holdings on Mango Markets through price manipulation so that he could 'borrow' a significant amount of digital assets that he had no intention to repay."

The legal filing stated Eisenberg "purchased over 400 million MNGO-USDC Swaps on Mango Markets with a position size of approximately $19 million."

Eisenberg then acquired "large quantities" of Mango MNGO/USD coins on three exchanges that functioned as Mango oracles, driving up the MNGO prices.

As a result, Eisenberg borrowed digital assets worth around $144 million from Mango Markets at inflated prices.

But as the price of MNGO subsequently dropped, this left Mango Markets in an illiquid state.

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Mango Manipulation? On Oct. 11, Eisenberg exploited Mango Markets by manipulating the value of the platform's native token, MNGO, in order to artificially inflate its price relative to USD Coin USDC/USD.

With the inflated collateral, Eisenberg and his team took out large loans, resulting in Mango's treasury losing approximately $110 million worth of various cryptocurrencies.

Mango began negotiations with Eisenberg for the return of the funds on Oct. 12 and by Oct. 15, Mango Markets confirmed that $67 million in various crypto assets had been returned.

Eisenberg took to social media on Oct. 15 to assert the Mango Markets exploit was a legal act, stating that he was simply using the protocol as intended and the exploit was a "highly profitable trading strategy."

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Photo: DRN Studio via Shutterstock