Mango Labs, the entity behind the Mango Markets decentralized financial platform, has filed its own lawsuit against exploiter Avraham Eisenberg. This comes just a week after the Securities and Exchange Commission (SEC) charged the DeFi trader with stealing $116 million from the Solana-based decentralized exchange Mango Markets.
Mango Labs sues Avraham
According to the filing on January 25 in the United States District Court for the Southern District of New York, Einseberg exploited the Mango Labs platform for millions of dollars in cryptocurrencies in October 2022. Mango Labs seeks $47 million in damages plus interest from the date of the attack.
Mango Labs also urged the court to deem an agreement between Eisenberg and Mango’s linked decentralized autonomous organization (DAO) “invalid and unenforceable.”
The arrangement was in response to Eisenberg’s governance proposal, which urged the DAO to allow him to keep $47 million in exchange for a promise that Mango Markets would not seek criminal charges for depleting its treasury.
Mango Labs said in its most recent complaint that Eisenberg “was not engaged in lawful bargaining,” adding:
[Eisenberg] forced Mango DAO to enter into an unenforceable settlement agreement—under duress—purporting to release depositors’ claims against him and precluding them from pursuing a criminal investigation.
Mango Labs
According to the Mango Labs complaint, Eisenberg is a notorious online personality with a history of targeting several cryptocurrency platforms and manipulating cryptocurrency markets. In addition, Eisenberg has attempted to take advantage of other protocols. For example, on November 22, he attempted to exploit the DeFi protocol Aave with a series of sophisticated shorts.
Since the attack, the defendant has continued to plot to attack Mango Markets further, in public, and has used the converted funds to attack other cryptocurrency protocols as well.
Mango labs
You can run, but you can’t hide
Often times than not, hackers go after decentralized finance due to its nature: that is far from the reach of governments. This is a loophole Avraham thought best to exploit. But as history has taught us; you cannot run fast enough from the arm of the law.
Eisenberg was arrested in Puerto Rico on December 27 and charged with commodities fraud and manipulation by the Federal Bureau of Investigation (FBI) for his attack on the platform.
On Jan. 9, the Commodity Futures Trading Commission (CFTC) charged Eisenberg with two counts of market manipulation in response to the FBI’s claims.
On October 11, Eisenberg reportedly used two accounts he controlled on the Mango Markets exchange to influence the price of Mango perpetual swaps. These futures contracts allow traders to keep positions open. According to court papers, he was able to increase the price of the swaps by 1,300% in 20 minutes and cash out.
Mango Markets ceased operations the day after Eisenberg’s malicious attack, with the price of its MNGO tokens plummeting to two cents.
Eisenberg boasted on Twitter about being a part of a team that managed an extremely profitable trading strategy, presumably referring to the Mango scheme. Additionally, he stated that he thought his acts were legal.
According to a federal lawsuit filed in Manhattan, Avraham Eisenberg agreed to refund $67 million of the ill-gotten profits a few days later. But, though the rest of the money, “he retained and continues to retain” – and Mango Labs wants it back.
SEC sues Eisenberg for draining Mango Markets
On January 20, the United States Securities and Exchange Commission (SEC) charged Eisenberg with violating anti-fraud and market manipulation provisions of U.S. securities laws. However, this action may have a broader impact.
The SEC’s claims are based on the agency’s claim that Mango Markets’ governance token, MNGO, is a security. The move is similar to its arguments in prior actions, which have put the crypto industry on high alert.
Aside from his activities, the SEC complaint revealed the Howey Test standards employed by the agency to classify MNGO as a security. The SEC has made a similar move in prior enforcement proceedings, most notably in the former Coinbase (COIN) manager’s insider trading case.
The SEC ruled nine tokens to be unregistered securities in this case without directly charging the token issuers or Coinbase for anything. Therefore, as in that scenario, the Mango action does not target the exchange Mango Markets.
The SEC’s backdoor listing of which tokens it considers securities has sent law firms representing crypto clients into a frenzy. In this case, the agency said that despite MNGO’s labeling as a “governance token,” it “was purchased and sold as a crypto asset security. ”
Its holders had profit expectations and “entered into a common enterprise,” two factors the SEC looks for when identifying investment contracts that are subject to securities laws. In addition, holders of MNGO tokens can also use them to vote on decisions governing Mango Markets’ operations, according to the agency.
SEC Chairman Gary Gensler and his enforcement officials have recently increased their warnings that the regulator is becoming tired of unregistered securities and the unlicensed exchanges on which they trade.
