This week is Avraham Eisenberg's criminal trial. Eisenberg is charged with stealing more than $100 million from the Mango Markets decentralized exchange (DEX).
From a financial expert to a Broadway singer, the jury for a federal court in New York was gathered on Monday.
Manipulation of the Mango Markets: Was it Trading Cleverness or Market Manipulation?
The case is related to the contentious Mango Markets hack that occurred in October 2022. Journalist Chris Brunet's inquiry revealed Eisenberg might have been involved.
Eisenberg was then detained by the Federal Bureau of Investigation (FBI) in Puerto Rico in December and accused of manipulating the market.
Whether Eisenberg's activities were illegal or just a deft use of the protocol is at the core of this issue. By increasing the collateral price using one account, he was able to borrow far more money from the platform using a different account.
In his defense, Eisenberg claimed that his acts were "legal open market actions, using the protocol as designed," noting that it is typical for there to be differences between a protocol's documentation and code and that his actions took advantage of an unforeseen outcome.
Multiple US officials accused Eisenberg of engaging in a “highly profitable trading strategy” notwithstanding his denials.
On January 20, 2023, the Securities and Exchange Commission (SEC) filed charges against him for the manipulation of MNGO tokens. The Commodity Futures Trading Commission (CFTC) had previously brought charges against him on January 9, 2023, for breaking commodities regulations, prior to the SEC's move.
The idea that "code is law" is contested in court
There is a lot of discussion about the Mango Markets case in the cryptocurrency world. Some support Eisenberg, claiming that traders who take advantage of weaknesses in blockchain platforms are shielded by the "code is law" notion. Prosecutors, however, insist that fraud and market manipulation are still prohibited in decentralized finance (DeFi).
"It discusses the main debate in crypto: is code law? It's not always legal to take advantage of opportunities just because they exist," according to Chris Janczewski of TRM Labs.
In the past, CFTC Chairman Rostin Behnam has stressed openness and participation from the DeFi sector. He did, however, make clear a contrast between protocols that are solely code-based and platforms that advertise their services to US consumers:
"Who is it that created that entity, that code, to sell those products—that one person or that collection of people?" Behnam underlined.
April 2024, Cryptoniteuae