The U.S. government has filed federal charges against Avraham “Avi” Eisenberg, a self-described “applied game theorist” and cryptocurrency trader who was arrested in Puerto Rico on Dec. 26 for stealing $110 million in digital assets from Mango Markets, a Solana-based crypto exchange.
Holders of Mango’s native token, MNGO, can lend, borrow, swap, and use leverage to trade crypto.
The Commodity Futures Trading Commission (CFTC), an independent U.S. government agency that regulates U.S. derivatives markets including futures, options, and swaps, filed charges on Jan. 9 against Eisenberg for commodities fraud and commodities manipulation in the U.S. District Court for the Southern District of New York.
Eisenberg is accused of allegedly helping to artificially inflate futures prices linked to Mango’s own token in a scheme that is sometimes called “oracle manipulation.” The scheme involves trading on a supposed decentralized digital asset platform, according to a government press release.
The well-publicized Mango Markets exploit dates back to Oct. 11, when Eisenberg and his trading partners took out a large position in Mango’s perpetual futures contracts, thereby artificially inflating the price of the illiquid MNGO token from $0.3 to $0.91 in the space of 20 minutes, according to Crypto Briefing. They then used their significant unrealized profits as collateral to borrow the protocol’s assets and drained $100 million+ from it.
They subsequently proposed in the Mango governance forum that they would give back the majority of the funds (and therefore make Mango depositors whole) in exchange for $47 million and a promise to drop any criminal investigation. Soon after, Eisenberg tweeted that he had been responsible for the exploit, famously saying that he had “operated a highly profitable trading strategy” the previous week.
He added that he believed “all our actions are legal open market actions, using the protocol as designed, even if the development team did not fully anticipate all the consequences of setting parameters the way they are”.
Brandon Racz, an agent at the FBI, said in the filing that Eisenberg flew from the U.S. to Israel the day after the trade, Financial Times reported. “Based on the timing of the flight, the travel appears to have been an effort to avoid apprehension by law enforcement in the immediate aftermath of the market manipulation scheme,” Racz said.
“Eisenberg’s open and brazen attitude may not have done him any favors,” Tom Carreras wrote for Crypto Briefing.
The charges specifically mention Eisenberg’s “highly profitable trading strategy” tweet, along with several others that show that Eisenberg was aware of laws prohibiting market manipulation.
Eisenberg ultimately returned $67 million to Mango Markets but kept $47 million worth of digital assets, according to CFTC.
In an earlier parallel action, the U.S. Attorney’s Office for the Southern District of New York unsealed a criminal complaint on Dec. 27, 2022, charging Eisenberg with commodities fraud and commodities manipulation.
The exploit set off a discussion about whether the incident was a hack or in fact “a highly profitable trading strategy.”
Game theory is the study of strategic decision-making using dissimilar disciplines such as mathematics, psychology, and philosophy. Since 1970, as many as 12 leading economists and scientists have been awarded the Nobel Prize in economic sciences for their contributions to game theory.