Jury Deliberation Begins in $110 Million Cryptocurrency Trading Manipulation Case

New York federal jurors have been presented with two distinct views in a trial involving allegations of manipulation on the Mango Markets cryptocurrency exchange. The accusations revolve around whether a trader illegitimately acquired $110 million or simply made use of legal strategies endorsed by the platform’s guidelines.

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In their final submission, prosecutors depicted 28-year-old Avi Eisenberg as someone who artificially inflated the price of the MNGO token through deceptive trading to unjustly leverage futures contracts on October 11, 2022. This purportedly resulted in a sudden surge in swap values, which he then exploited by ‘borrowing’ against his own distorted contracts.

“The defendant’s tactics were a clear case of fraud and deception,” Assistant U.S. Attorney Peter Davis stated during the closing remarks. “He artificially drove up the price and employed deceit to misappropriate funds.”

The landmark trial, which kicked off last week, marks the first U.S jury to deliberate on crypto market manipulation. While prosecutors stand firm that established criminal laws are applicable, the defense insists that Eisenberg merely adhered to the exchange’s regulations, which lack the robust safeguards found in other financial systems.

‘Trade at Your Peril’

Defense lawyer Brian Klein leaned on the notion that his client carried out a lawful yet daring trading approach in which he risked his personal capital. Klein emphasized that Eisenberg was in full compliance with the autonomous smart contracts that govern the decentralized finance platform, with only a cautionary disclaimer to users about the risks involved.

According to Klein, Eisenberg recognizes that his trading involved taking both long and short stances. “Taking significant risks isn’t against the law,” Klein contended.

Jury deliberation on the case is imminent. Eisenberg faces charges for fraud related to commodities, market manipulation, and wire fraud.

Mango Markets, which offers services like borrowing, lending, and trading of cryptocurrencies, is managed by a Decentralized Autonomous Organization or DAO. Eisenberg consented to return $67 million in cryptocurrency after the incident, to dissuade the DAO from freezing his assets and pursuing legal action against him.

A Wall Street-experienced juror found it curious when Davis proposed the hypothetical of telling a bank supervisor successful trades were made only to return a portion of the profits voluntarily.

Following his dealings on Mango Markets, Eisenberg left Puerto Rico for Israel. His arrest by U.S. authorities occurred when he flew back to Puerto Rico on December 26, 2022. Since then, Eisenberg has been detained due to concerns over potential flight risk.

Online Footprints

Prior to his activity on Mango Markets, Eisenberg had searched online for terminology connected to fraudulent behavior and market manipulation legal limitations. Post-trades, his online inquiries included topics about FBI monitoring and extradition laws relative to Israel.

“The search history stands as overwhelming evidence of the defendant consciously engaging in illegal activities,” argued Davis. Eisenberg has also been accused of executing trades under the false identity of a Ukrainian woman, whose login details he had purchased, and for tampering with futures contract pricing through oracle-program manipulation, according to the prosecution.

“The greater the price manipulation, the higher the illicit gains,” Davis emphasized.

In the final statements, Klein argued that Eisenberg did not embezzle from Mango Markets but rather withdrew both his initial investment and legitimately made profits.

“His profits remained with him, while the ‘borrowed’ funds were returned,” Klein explained.

Mango Markets’ lack of ID verification requirements was highlighted by Klein. “The platform was indifferent to trader identities or locations, allowing self-trading throughout the day,” he said.

The platform functioned precisely as intended by the smart contracts, without any deviations,” asserted the defense attorney.

This case, formally known as US v. Eisenberg, under case number 23-cr-00010, is currently before the U.S. District Court for the Southern District of New York (Manhattan).

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