Mango Markets heist like a fake diamond ring scam: Prosecutor

Prosecutors have compared Avraham “Avi” Eisenberg’s suspected $110 million swindle of the Solana decentralized exchange Mango Markets to a classic fake diamond ring scheme in simpler terms.

According to a report from Inner City Press X posted on April 9th, Assistant Attorney Tian Huang of the United States made this statement during the opening arguments in a Manhattan federal court case: Eisenberg’s behaviors on October 11, 2022, were fraudulent and manipulative in nature.

“Consider this scam. A person sells a fake diamond ring, worthless plastic. The con man disappears and runs off. This case is a modern twist on that. That man, Avraham Eisenberg? He ran.”

“In just 20 minutes, Huang manipulated the value of cryptocurrency, raising its price an astounding thousand percent. He deceived Mango Markets into believing he held large amounts, successfully swindling them.”

“He obtained more than $110 million worth of cryptocurrency from someone else, but in reality, he didn’t borrow it. Instead, he took it fraudulently. He made off with the cryptocurrency.”

Mango Markets heist like a fake diamond ring scam: Prosecutor

Eisenberg has consistently refuted allegations of manipulation at Mango Markets, maintaining instead that he employed a successful trading technique and that his activities were lawful open market transactions.

At the trial, attorney Sanford Talkin disputed the allegations and pointed out that Eisenberg put $13 million of his own money on the line for the trade and potentially stood to lose everything if it didn’t succeed.

During this trading strategy, there was always a risk that he could lose all his assets. It wasn’t a foolproof or hidden decision; rather, the gamble he took was openly visible to everyone. (Talkin’s statement)

The Mango Markets incident transpired in an open manner since blockchain transactions are publicly accessible. Consequently, anyone had the opportunity to make counter-trades.

If his trading partners had been present and chosen to do so, they could have conducted trades with him instead, Talkin pointed out. He had executed a profitable trade.

In October 2022, Eisenberg raised the price of MNGO tokens in comparison to USDC.

After that, he obtained several loans using the overvalued MNGO price as collateral, depleting Mango Markets’ cryptocurrency holdings, totaling approximately $110 million.

Approximately a week after the incident, on October 15th, Mango Markets announced that they had recovered $67 million worth of cryptocurrencies. Eisenberg subsequently admitted on X to his actions involving the crypto exchange, expressing his belief that they conformed to the exchange’s smart contract regulations.

The Mango Markets team pursued a lawsuit against Eisenberg seeking $47 million in damages and interest, even though some of the funds had been restored.

Crypto lawyer weighs consequences

In a recent X post on April 9, crypto lawyer Gabriel Shapiro expressed his view that the decision on Eisenberg’s case could hold greater significance for the crypto industry’s future than the criminal trial involving Sam Bankman-Fried.

Mango Markets heist like a fake diamond ring scam: Prosecutor

Shapiro, Delphi Labs’ legal chief, expressed agreement with the allegation against Eisenberg concerning market manipulation. However, he had objections regarding the particulars of the regulations Eisenberg was supposed to comply with.

“Avi is being criticized for allegedly violating an unspecified term in a loan contract related to using a DeFi protocol, which Shapiro finds hard to believe and inconsistent with the decentralized finance system,” is one possible paraphrase.

Consider this scenario: Your position in Aave gets liquidated due to network congestion. Unfortunately, the value of your collateral drops significantly below the required threshold, leading to a bad debt for the protocol. Would you prefer AaveDAO to have the authority to sue you to recover the outstanding debt?

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2024-04-10 05:05