CFTC sues game theorist Avraham Eisenberg for $110m worth “oracle manipulation” on Mango Markets
“The CFTC will use all available enforcement tools to aggressively pursue fraud and manipulation regardless of the technology that is utilized. The CEA prohibits deception and swap manipulation, whether on a registered swap execution facility or on a decentralized blockchain-based trading platform”.
The Commodity Futures Trading Commission has filed a complaint against Avraham Eisenberg for an alleged fraudulent and manipulative scheme to unlawfully obtain over $110 million in digital assets from a purported decentralized digital asset exchange.
This is the CFTC’s first enforcement action for a fraudulent or manipulative scheme involving trading on a supposed decentralized digital asset platform, and its first involving
This kind of scheme is sometimes called “oracle manipulation” and is the first enforcement action by the CFTC against this type of fraud.
MNGO jumped over 13-fold during a 30-minute span
According to the CFTC, on October 11 2022, Eisenberg unlawfully misappropriated over $110 million in digital assets from Mango Markets, a purported decentralized digital asset exchange, through “oracle manipulation.”
This was allegedly done by creating two anonymous accounts on Mango Markets, which he used to establish large leveraged positions in a swap contract whose value was based upon the relative price of MNGO, the “native” token of Mango Markets, and USDC, a stablecoin.
Avraham Eisenberg then artificially pumped up the price of MNGO by rapidly purchasing substantial quantities of MNGO on three digital asset exchanges that were the inputs for the “oracle,” or data feed, that Mango Markets used to determine the value of Eisenberg’s swap positions.
The manipulative trading allowed the price of MNGO to jump over 13-fold during a 30-minute span, resulting in a temporary, artificial spike in the value of Eisenberg’s swap positions. Having allegedly cashed out illicit profits by using the artificially inflated value of his swaps as collateral to withdraw over $110 million in digital assets from Mango Markets, the attacker drained the platform of most of the assets that had been deposited by other users.
Avraham Eisenberg agreed to return $67 million in an attempt to evade liability
The CFTC adds that, in an attempt to evade liability, Eisenberg agreed to return a portion of the misappropriated digital assets on the condition that Mango Markets agreed, among other things, to “not pursue any criminal investigations or freezing of funds.”
He ultimately returned approximately $67 million to Mango Markets, while retaining approximately $47 million worth of various digital assets.
“The CFTC will use all available enforcement tools to aggressively pursue fraud and manipulation regardless of the technology that is utilized. The CEA prohibits deception and swap manipulation, whether on a registered swap execution facility or on a decentralized blockchain-based trading platform”, said Acting Director of Enforcement Gretchen Lowe.
A parallel criminal complaint in New York charged Eisenberg with commodities fraud and commodities manipulation.
