Judge Dismisses Market Manipulation and Fraud Charges
A U.S. federal judge has overturned the fraud and market manipulation convictions against Avraham Eisenberg, the crypto trader accused of exploiting decentralized exchange Mango Markets for $110 million. The decision marks a major setback for the U.S. government’s efforts to regulate and prosecute cases involving decentralized finance (DeFi).
The court found that the evidence presented during the trial did not support the jury’s conclusion that Eisenberg made false representations during the exploit. Eisenberg’s defense successfully argued that he did not deceive anyone but simply took advantage of flaws in Mango Markets’ smart contract code.
Exploit Was Legal Under Code, Judge Rules
Eisenberg was originally accused of inflating the price of Mango’s native token (MNGO) by more than 1,300%, which allowed him to borrow and withdraw roughly $110 million in crypto assets. Prosecutors charged him with commodities fraud and market manipulation, claiming that his actions misled other market participants.
However, the judge sided with Eisenberg’s legal team, agreeing that the actions, while controversial, were not criminal under current law. The court emphasized that the decentralized exchange’s design flaws enabled the exploit and that Eisenberg’s strategy was transparent to those who understood the code. This interpretation challenges how U.S. law applies to DeFi protocols and could influence future enforcement.
In a separate ruling, the judge also dismissed the venue argument, rejecting the government’s push to move the case to New York.
While this legal victory clears Eisenberg in the Mango Markets case, he is not completely out of legal trouble. He still faces multiple civil lawsuits related to the same exploit. Additionally, Eisenberg is currently serving a prison sentence for an unrelated conviction involving possession of child pornography.
The ruling underscores a broader debate around the legality of code-based exploits in decentralized finance, potentially setting a precedent for similar cases in the future.
