Cryptocurrency investor Avraham Eisenberg has been arrested in Puerto Rico on charges of fraud and commodity manipulation for allegedly stealing more than $100 million from decentralized finance (DeFi) protocol Mango Markets.
This is the first time that a US resident has been accused of manipulating a DeFi platform.
Eisenberg drains $110 million from mango markets
Recall that Eisenberg admitted that his team used a “highly profitable trading strategy” to drain Mango Markets of digital assets worth $110 million in manipulate the price of the platform’s native token, MNGO, and the withdrawal of almost all crypto deposits from the protocol.
As a result of his actions, investors lost almost all of their deposits on the DeFi platform, although Eisenberg later returned around $67 million to Mango Markets.
Fraud and manipulation fees
Despite refunds, the DeFi protocol eventually went insolvent, and Eisenberg now faces charges of fraud and commodity manipulation, which can result in fines or jail time.
Eisenberg was arrested on Monday, December 26. According to a criminal complaint unsealed on Tuesday, the defendant allegedly raised the price of the swaps by 1,300% before using the inflated swaps to borrow and withdraw the assets in 20 minutes.
The complaint alleges that the defendant “wilfully and knowingly” manipulated the sale of a commodity — specifically, futures contracts on the DeFi protocol.
A deposition signed by FBI Special Agent Brandon Racz states that Eisenberg “engaged in a scheme involving the intentional and artificial manipulation of the price of perpetual futures contracts on a cryptocurrency exchange called Mango Markets, and d ‘other manipulative and deceptive devices and artifices’.
Racz: Eisenberg may have known his actions were illegal
Shortly after his attack on Mango Markets, Eisenberg said in a maintenance that his team’s actions were legal and that the affected projects could not press charges because the exploit could not be called a hack.
However, Racz noted that Eisenberg may have known his actions were illegal because he left the United States for Israel within 24 hours of exploiting the exchange. According to the FBI agent, the Mango Markets exploiter quickly left the United States to avoid apprehension.
Interestingly, Mango Markets is not the only DeFi protocol Eisenberg and his team have tried to exploit. In November, the trader tackled a sophisticated flaw in DeFi platform Aave using a series of short attacks. However, the attempt failed, resulting in a significant loss for the exploiter.