Mango Markets Hacker in US Regulator's CrosshairsCFTC Takes First-Ever Action Against an Oracle Price Manipulation Strategy
The man allegedly behind a $114 million scheme to defraud decentralized cryptocurrency platform Mango Markets now faces a civil lawsuit from U.S. federal regulators as well as a criminal prosecution.
See Also: What is next-generation AML?
The Commodity Futures Trading Commission filed suit in Manhattan federal court demanding that Avraham Eisenberg return the money he allegedly stole, pay a fine of at least $1 million and be prohibited from trading in digital assets in the future.
The civil lawsuit is likely the least of Eisenberg's worries. He has been in a Puerto Rico jail cell since his late December arrest by the FBI (see: Mango Markets Hacker Charged with Fraud, Market Manipulation).
The criminal and civil cases against Eisenberg allege he inflated the value of the Mango Markets cryptocurrency through a series of high-volume purchases of the typically little-traded currency. The CFTC and prosecutors say he withdrew the inflated value of a long position on the Mango cryptocurrency by using the tokens as collateral and in the process, drained the decentralized platform of nearly all its available funds, including customer deposits.
"Mango Markets was left holding a mostly empty bag," attorneys for the CFTC wrote in their complaint. Eisenberg's criminal case includes charges punishable by decades in prison.
The CFTC lawsuit constitutes the agency's first enforcement action involving a decentralized finance platform and its first against the specific method Eisenberg allegedly used to inflate the value of the Mango cryptocurrency - what's known as an "oracle price manipulation strategy."
Mango Markets calculated the value of its token by taking the average of market prices on three independent cryptocurrency exchanges. The applications that take those data feeds and take the average of the trading prices are oracles. The federal government says Eisenberg knew which three trading platforms functioned as oracle data feeds and targeted them to make rapid purchases of the Mango token in order to drive up the price. He inflated the token by 13-fold through trading that took place over a 30-minute period, the CFTC says.
Blockchain security firm CertiK told Information Security Media Group earlier that the attacker used two wallets to manipulate the price of the Mango token to a peak of $0.91. Mango Markets explained the technical details of the attack in a series of tweets.
Eisenberg likely knew the consequences of his actions, prosecutors allege. He boarded a flight to Israel, and the timing of the flight implies that the travel may have "been an effort to avoid apprehension by law enforcement in the immediate aftermath of the market manipulation scheme," FBI special agent Brandon Racz said in a Dec. 23 federal criminal complaint. Eisenberg conducted the alleged fraud while located in Puerto Rico.
A Puerto Rico court on Jan. 4 ruled that Eisenberg must remain in jail pending trial.