Crypto trader's defense says Mango Markets was a trade, not theft
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Crypto investor Avraham Eisenberg put $13 million on the line in his Mango Markets trade, his defense counsel argued today, and his $110 million take was never a sure thing.
Why it matters: To get a conviction in its criminal fraud case, the government will have to show that Eisenberg both had knowledge that he was acting illicitly and that the laws he has been charged under actually apply to decentralized finance (DeFi).
Opening statements were made today by both sides in the Mango Markets case.
- Neither side disputes the fact that on October 11, 2022, Eisenberg executed a trade on the Solana-based decentralized exchange and money market, known as Mango Markets.
- Where they disagree is whether what he did constituted any of the three crimes he's been charged with.
Between the lines: "Let me tell you about a scam," prosecutor Tian Huang said in her opening statements.
- She asked the jury to imagine someone who borrowed a lot of money from someone using a diamond ring as collateral. Only, after the borrower had walked away with a fistful of cash, the lender realized the diamond ring was made of plastic.
- Eisenberg did effectively the same thing on Mango Markets in 2022, she contended. "He wasn't really borrowing. He was stealing," she said.
- Further, she said, the defendant's private words and actions will show that he knew what he was doing was illegal, and that's why he left the country within 24 hours after completing the scheme.
The other side: Not so fast, said attorney Sanford Talkin, in opening remarks for the defense. Eisenberg was operating outside the world of traditional finance, and in the high-risk and high-reward world of the cryptocurrency trading market.
- Talkin made two key points about Eisenberg's trade that he said his side would substantiate over the course of the trial. First, that it was very risky, requiring Eisenberg to put $13 million of his own funds on the line which he could have lost if the trade went wrong.
- Second, every move he made was publicly viewable on the blockchain. He was not operating in secret, but out in public. If his counterparties had seen them and opted to, they could have traded against him.
Zoom out: It's likely to be a difficult point on which to convince a jury — most of whom are unfamiliar with cryptocurrency. That said, it does make the facts in this case appreciably different from those in Sam Bankman-Fried's, who was able to borrow money from his users in secret.
- Talkin also argued that the laws in question don't apply to the assets Eisenberg traded. "You will hear many contorted and stretched arguments from the government," Talkin advised.
- "He did nothing more but execute a winning trade."
💭 Our thought bubble: For a case where so few facts are in dispute, the defense came out much stronger than might have been anticipated.
The bottom line: This is going to be a case where a jury will be confronted with the many ways that decentralized finance (DeFi) operates very differently from traditional finance.
