On April 9, the federal court in New York began hearing the case of Abraham Eisenberg, who is suspected of attacking the DeFi project Mango Markets in 2022 and withdrawing $116 million worth of digital assets.

Originally scheduled for December 4, 2023, the trial was postponed at the request of the defense.

Eisenberg was arrested in Puerto Rico in 2022. Later, the CFTC and SEC accused him of fraud and market manipulation for illegal enrichment.

The defendant admitted that his team orchestrated a coordinated attack on Mango. However, he claimed the legality of these actions, calling them a “high-yield trading strategy” that leveraged the advantages of the protocol.

In practice, Eisenberg “inflated” the platform’s native token MNGO, manipulating the price oracle and using coins as collateral to obtain loans totaling around $116 million. These actions led the DeFi project into insolvency.

Later, the trader agreed with the Mango DAO to return $67 million of the withdrawn funds, and the developers announced their readiness to relaunch the protocol.

Essence of the Trial

Eisenberg stands accused of illegally manipulating Mango Markets futures contracts, writes CoinDesk. The court has already selected 15 jurors to hear the case.

The arguments began with the prosecutors’ reflections on how Mango founder Davíd Durájrāja communicated with the accused regarding fund repayment. According to them, the platform’s CEO did not engage in negotiations on equal terms but rather found himself in a “hostage situation.” They accused Eisenberg of extortion.

Judge Arun Subramanian partially supported the defense team and advised government representatives not to bring up this issue during the main hearings.

The parties also disputed the use of the term “manipulation,” its possible use by witnesses, and its presence in Mango’s terms of service. Additionally, there were disagreements regarding the “responsibilities” of traders when trading on crypto platforms.

This case will be the first precedent in the United States where a trader is accused of malicious interaction with a DeFi protocol.

It is worth noting that in February 2023, the rating agency Moody’s concluded that the trial of Eisenberg will have a positive impact on the DeFi sector.

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