CFTC Files Charges Against the Mango Markets $110M Exploiter

• Eisenberg led off the deceptive manipulation of Mango Markets’ assets on October 11, 2022.
• $47 million worth of assets is still in the exploiter’s custody as a bug bounty.

The Commodity Futures Trading Commission (CFTC) filed a civil enforcement action in the United States District Court of Southern District of New York on Monday against the “Mango Markets exploiter” Avraham Eisenberg for indulging in illicit market manipulation. Significantly, this is the first time CFTC will charge an illegitimate trader with an enforcement action for initiating a manipulative scheme on a DeFi platform. 

Gretchen Lowe, Acting Director of Enforcement at CFTC, asserted:

“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.”

Reportedly, Eisenberg executed a fraudulent trading scheme on the Solana-based DEX Mango Markets to wipe out over $110 million worth of digital assets during last year’s mid-October. Eisenberg is detained in prison in Puerto Rico since December 27 after filing by the US Department of Justice (DOJ).

CFTC Briefing Eisenberg’s Deceiving Plot

Through Monday’s filing, CFTC laid out and briefed Eisenberg’s deceptive trading scheme – the so-called  “oracle manipulation.” Oracles, off-chain data providers, are integral parts of the DeFi exchange. That is, the price feed of Mango Markets is in sync with three external exchanges (“oracle exchanges”). This mechanism turned out to be a beneficial factor for Eisenberg’s plot.

The exploiter set up his swap positions on the DEX with two anonymous trading accounts. He deployed $5 million worth of USDC from each account to purchase large sums of the exchange’s native tokens MNGO on oracle exchanges. This brief whale activity triggered a spike in the price of MNGO. In 30 minutes, the price of MNGO spiked 13% from $0.04 to $0.54, as on the attack day. 

The price of MNGO-USDC Swaps on Mango Markets is directly proportional to that of the MNGO traded on the DEX. Following this, his token swaps’ prices were artificially inflated. Eventually, he managed to deploy those as collateral to borrow funds and wipe out Mango Markets’ major liquidity. According to CFTC, he liquidated $114 million worth of cryptos such as Bitcoin (BTC), Ethereum (ETH), Tether (USDT) from Mango Markets. 

Despite the accusations, Eisenberg called this entire act “a highly profitable trading strategy.” To prevent Mango Markets from filing a criminal investigation or freezing his funds, Eisenberg executed his proposal of returning $67 million worth of cryptos that he illicitly wiped out from the DEX. The US regulators are looking forward to the unrevealed court trial date. As per the Commission, Eisenberg might be subjected to monetary penalties and be banned from any trading activity.