Published on 22nd April 2024
A crypto trader who has been found guilty of employing unauthorized strategies to artificially boost futures contracts may face a maximum sentence of 20 years.
In a groundbreaking decision delivered in New York recently, Avraham Eisenberg was convicted by a federal jury for orchestrating a sophisticated cryptocurrency manipulation scheme. This case, the first of its kind in the United States, revolved around the exploitation of vulnerabilities on the decentralized exchange (DEX) Mango Markets to illicitly acquire cryptocurrency valued at USD 110 million. Eisenberg’s deceptive trading techniques focused on perpetual futures contracts on the platform, where he allegedly manipulated the contract prices through undisclosed maneuvers, leading to an artificial inflation of prices. This manipulation enabled him to borrow substantial amounts of other cryptocurrencies from Mango Markets by leveraging the inflated value of his assets.
The investigation that culminated in the conviction was a collaborative effort involving the Federal Bureau of Investigation (FBI), Homeland Security Investigations, and the Internal Revenue Service (IRS) Criminal Investigation. The National Cryptocurrency Enforcement Team (NCET), established to combat the increasing misuse of cryptocurrencies, played a pivotal role in the prosecution. This specialized unit is dedicated to probing individuals and entities exploiting digital assets for illicit purposes, with a focus on virtual currency exchanges, money laundering services, and infrastructure providers. Additionally, the NCET is engaged in establishing strategic priorities in the digital asset realm, pinpointing areas necessitating further scrutiny and legal action, and fostering partnerships between governmental bodies and the private sector to combat cryptocurrency-related offenses.
The announcement of the verdict was accompanied by optimistic remarks from U.S. authorities. Principal Deputy Assistant Attorney General Nicole Argentieri emphasized the significance of holding individuals responsible for manipulating financial markets, whether traditional or digital. She stressed the Department of Justice’s unwavering commitment to safeguarding financial systems. U.S. Attorney Damian Williams for the Southern District of New York echoed these sentiments, labeling the prosecution as “historic” and a testament to his office’s adaptability in response to evolving financial landscapes. Williams praised the “career prosecutors” for their proficiency in combating financial fraud, a key priority, and issued a stern warning to potential wrongdoers, emphasizing that “potential financial criminals should reconsider their actions.”
Law enforcement officials also expressed their views on the matter. Executive Assistant Director Timothy Langan of the FBI’s Criminal, Cyber, Response, and Services Branch reiterated the Bureau’s dedication to pursuing individuals who exploit financial institutions for personal gain. He asserted that individuals engaging in fraudulent activities, whether in the cryptocurrency domain or through other forms of market manipulation, will be held accountable for their illicit gains. Eisenberg is facing a potential 20-year prison sentence, with the sentencing scheduled for 29th July.
The prosecution was led by Special Assistant U.S. Attorney Tian Huang, a member of the National Cryptocurrency Enforcement Team (NCET), in collaboration with Assistant U.S. Attorneys Thomas Burnett and Peter Davis from the Southern District of New York.
While Eisenberg’s prosecution underscores the U.S. government’s commitment to addressing manipulative practices in this emerging financial sector and its capability to adapt existing legal frameworks to ensure accountability, it is likely to trigger discussions regarding potential regulatory actions concerning decentralized exchanges like Mango Markets.
In the case of United States of America v Eisenberg, the prosecution team included U.S. Attorneys Noah Solowiejczyk, Peter Davis, Sanford Talkin, and Thomas Burnett, along with Tian Huang.
Eisenberg was represented by Ashley Martabano, Brian Klein, and Riley Smith of Waymaker, and Noam Greenspan of Talkin, Muccigrosso & Roberts.