Crypto trader Avi Eisenberg convicted of fraud in $110 million Mango Markets scheme
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A jury found Avraham "Avi" Eisenberg guilty on all three counts of fraud and manipulation in a $110 million crypto trade scheme using the Mango Markets platform.
Why it matters: The case was the first known test for a jury to decide whether existing U.S. laws governing fraud and market manipulation apply to the world of decentralized finance (DeFi).
Between the lines: The 28-year-old Eisenberg will be held to account for his actions on Oct. 11, 2022, when a series of trades he made intentionally boosted the price of Mango Markets' native token, MNGO, as well as the price of futures contracts.
- He used the inflated futures holdings as collateral to borrow other cryptocurrencies on the platform, then quickly withdrew those assets and walked away from his collateral.
- Eisenberg never disputed the facts of the strategy but contended that what he did was legal and permitted by the DeFi protocol, a principle in the industry known as "code is law."
The big picture: U.S. laws apply to DeFi.
Zoom in: "Avraham Eisenberg ran a con," prosecutors said Wednesday, during closing arguments, continuing its momentum from last week. The word "con" was used at least six more times in those remarks.
The other side: Waymaker Law's Brian Klein in the defense's closing argument Wednesday referenced smart contracts — the code that runs decentralized platforms — pointing to Eisenberg's "code-is-law" claim.
- He referenced Mango Market's risk disclaimer, plus the exchanges' terms of service contracts to assert Eisenberg's innocence.
- Somewhere in the thick of Klein's explanation of smart contracts, a juror — who had a tendency to nod off during technical aspects of the case — fell asleep. He was snoozing for parts of the government's rebuttal too.
What we're watching: Eisenberg could face as much as 20 years in prison.
