Mango Markets Exploiter Skirts Fraud Charges—DeFi Justice or Loophole?

DeFi’s wild west just got wilder. The Mango Markets hacker dodged a federal fraud bullet—but the crypto community isn’t celebrating.

How? By weaponizing DeFi’s own rules against it. The exploiter argued their $114M heist was ’legal code’ rather than theft. A New York jury bought it.

Yet the victory reeks of irony. The same ’immutable’ smart contracts that failed to prevent the attack became the hacker’s legal shield. Meanwhile, Mango’s users—many retail traders—got rekt.

Regulators are fuming. This case sets a dangerous precedent: exploit now, litigate later. Expect more ’whitehat’ hackers to suddenly discover ethical flexibility when nine-figure sums are at stake.

One thing’s certain—in crypto, the house always wins. Even when it gets robbed.

TLDR

• A US judge dismissed the fraud and market manipulation charges against Avraham Eisenberg.
• The court found that the evidence was insufficient to support the charges.
• The judge ruled that Mango Markets was a decentralized and permissionless platform.
• Eisenberg was accused of manipulating the price of MNGO tokens on Mango Markets.
• He returned over 67 million dollars after profiting from his trading activities.

A United States federal judge has dismissed key charges against Avraham Eisenberg in the high-profile Mango Markets case. The court ruled that the fraud and market manipulation charges lacked sufficient evidence to support a conviction. This decision marks a significant turn in one of the most notable crypto-related cases in recent years.

The ruling came after the jury verdict failed to confirm claims that Eisenberg misrepresented Mango Markets during his October 2022 trading activity. Judge Arun Subramanian stated that Mango Markets, being decentralized and permissionless, showed no clear evidence of deception. As a result, the commodities fraud and manipulation accusations could not be sustained in court.

Prosecutors originally claimed that Eisenberg inflated the price of MNGO tokens and their USDC swap pairings. They stated that his actions constituted a classic case of oracle manipulation within Mango Markets. However, the judge concluded that the government failed to prove the element of falsity required for conviction.

Mango Markets Scheme Lacked Legal Grounds for Fraud

The Commodity Futures Trading Commission (CFTC) filed manipulation charges in January 2023 following Eisenberg’s arrest. These charges focused on the alleged artificial inflation of prices on Mango Markets between October 11 and October 15, 2022. Eisenberg was accused of exploiting the automated pricing mechanisms of the decentralized protocol.

The court determined that Mango Markets functioned without central control, weakening the government’s case of false representation. The ruling emphasized that Eisenberg acted within a system where all transactions occurred transparently and by algorithmic rules. Therefore, the claims of market manipulation lacked the required legal foundation.

Despite earlier prosecution claims, Eisenberg asserted his actions were part of a lawful and profitable trading strategy. Following his earnings, he returned over $67 million to Mango Markets users. However, that return did not influence the court’s evaluation of the evidence.

Mango Markets Case Not Fully Closed

Although the fraud charges were dismissed, Eisenberg still faces civil lawsuits from the SEC and the CFTC. These regulatory bodies continue to pursue legal action based on the same Mango Markets incident. Their investigations remain active, and court proceedings are ongoing.

This legal development follows broader changes in crypto enforcement under the current administration. Several major crypto firms like Ripple, Coinbase, and Uniswap have seen charges dropped without penalties. The relaxed approach could affect the outcome of remaining cases, including those tied to Mango Markets.

Meanwhile, Eisenberg received a four-year prison sentence for possessing child sexual abuse material, unrelated to Mango Markets. He pleaded guilty to having over 1,200 illegal images and videos. That sentence is separate and remains in effect, regardless of outcomes in his crypto cases.

Fraud Charges Dropped Due to State Limits

Prosecutors previously attempted to hold the fraud trial in New York, but jurisdiction issues led to a dismissal. The judge found no strong connection between Mango Markets and the state to justify a local trial. As a result, those specific charges were removed from the docket.

While Eisenberg is cleared of fraud for now, authorities may consider refiling charges in a different jurisdiction. Legal experts suggest that such actions depend on future developments in the Mango Markets case. The platform’s decentralized nature will likely remain a central issue in any renewed litigation.

Mango Markets has become a key example in debates over how laws apply to decentralized platforms. The dismissal of charges against Eisenberg sets a precedent that could affect similar cases. Regulatory bodies may need clearer legal definitions to prosecute future incidents involving Mango Markets or comparable protocols.