Avraham Eisenberg, a crypto investor, was arrested on Monday night in Puerto Rico.
It is believed that this is the first time a US resident has been charged with manipulating a decentralized finance (DeFi) trading platform.
The charges of commodities fraud and commodities manipulation that Eisenberg faces could lead to punishments ranging from fines to prison time.
The FBI Special Agent Brandon Racz’s deposition claims that Eisenberg “willfully and knowingly” manipulated the sale of a commodity — namely futures contracts on Mango Markets. It is believed that Eisenberg had devised a “highly profitable trading strategy” which drained the DeFi trading platform of crypto worth $110 million.
Eisenberg had been manipulating the price of perpetuals contracts (a type of futures contract popular in crypto markets) for Mango Markets’ native token MNGO.
He sold massive amounts of MNGO perpetuals contracts to himself, thus pumping the price of those contracts 1,300% in under an hour. After making a huge profit, Eisenberg then borrowed against the value of his position and “withdrew essentially all of the cryptocurrency deposits on the Mango Markets platform”.
In the aftermath of the incident, Eisenberg negotiated with Mango Markets and agreed to return $67 million to the decentralized autonomous organization (DAO) governing it.
Mango DAO planned to return those funds to users impacted by Eisenberg’s attack. It is hoped that this case will help to further increase the security of platforms like Mango Markets, as well as other decentralized finance (DeFi) trading platforms.
With the increased scrutiny of the US justice system, it is likely that security measures will be further tightened up, and that traders will be held to higher standards of conduct.
It remains to be seen what punishment Avraham Eisenberg will face for his crime, but it is clear that the US justice system is taking a firm stance on the issue of market manipulation., and that the US justice system will continue to take a hard stance on those who commit fraud or manipulate markets.
DeFi will be there having the increased scrutiny of US justice system, and a certain level of influence from governement. We may have more incidents sooner or later and then apply again new anti-fraud and manipulaion tools to protect investors and protocol itself.
For me, most important thing to select DeFi is the founder and mangement team who have high willngness of business growth and morality. Even though we may face unpredicted incidents, the reliable mangement team could reward all loss and build up again based on thier reliable willingness.
Source: Coinmonks, SummersThings