Mango Labs v Eisenberg: Crypto Exchange Sues Its Hacker

The Solana-based decentralized exchange (DEX) Mango Labs sued Avraham Eisenberg for his “profitable business strategy”. The individual exploited a vulnerability in the platform allowing him to profit to the detriment of Mango Markets and its users.

In October 2022, the Mango Markets trading platform reported an anomaly even in a tweet. The platform investigated an incident in which a hacker was able to withdraw funds from Mango through a service called “oracle”, allowing a bad actor to manipulate the price of an asset.

The cryptocurrency exchange’s immediate security response was to disable front-end deposits as a precaution and to advise its users to avoid all deposits until the situation becomes more evident.

Additionally, the exchange posted a proposal to the then anonymous hacker, where the amounts of the debt payment and the procedures for finding a solution were subjected to a DAO survey.

Decentralized finance (DeFi) sleuths from blockchain security firm OtterSec discovered that the trader, later identified as Eisenberg, had funded an account with $5.5 million USDC collateral from FTX. The attacker created an MNGO PERP (perpetual future) position of 480 million and counter-traded on another account, manipulating the price of MNGO and increasing the value of its collateral.

In less than 24 hours, independent investigator Chris Brunet revealed the identity of the man behind one of the biggest losses in the manipulation of the mango markets.

Crypto Hacker or Profitable Trader?

On October 15, 2022, Eisenberg said he was involved with a team that implemented a “very” profitable and legal business strategy within days of the event. Eisenberg’s actions were controversial; some called him a profitable trader, while others considered him a bad actor.

In December 2022, Avraham Eisenberg was arrested in Puerto Rico by the United States Department of Justice; he was charged with carrying out a $110 million exploit on crypto exchange Mango Markets and fraud and manipulation with charges in the Southern District of New York.

U.S. Attorney for the Southern District of New York Damian Williams and Assistant U.S. Attorney Thomas Burnett ordered the arrest.

Eisenberg later agreed to return $67 million in profits after the incident. Mango Market claimed in a federal lawsuit that the merchant kept the profits he made from his “profitable trading strategy.” The Solana-based crypto exchange is seeking to recover funds they believe to be stolen.

US law enforcement goes against Einseberg

On January 21 of this year, the Securities Exchange Commission (SEC) accused Avraham Eisenberg with title manipulation. Additionally, the Federal Bureau of Investigation (FBI) and the Commodities Future Trading Commission (CFTC) have charged Eisenberg with fraud, manipulation and violation of state commodity regulations.

Mango Market continues to claim that Avraham Eisenberg is trying to illegally keep the rest of the money he earned from the so-called ‘Mango Scheme’, according to a filing in court.

Eisenberg awaits sentencing in Puerto Rico, where he was arrested last year. The author of the “Mango Scheme” is being prosecuted in the Southern District of New York on the above counts:

(…) The accused, who was arrested and jailed in a federal prison in Puerto Rico, is awaiting transport to New York for parallel criminal charges.