Crypto Scam: Discussing vulnerabilities of decentralized finance through Avraham Eisenberg Case
Crypto News: The phrase “code is law” is a fundamental concept in decetalized finance (DeFi). This implies that the people involved in this system are required to abide by the rules encoded in the smart contracts and blockchain protocols no matter what. This suggests that the code governing these systems is the ultimate authority. But the recent crypto scam case, where Avraham Eisenberg got convicted for stealing US$110 million, tells another tale. This case is the proof that even in decentralized systems where code is meant to be law there are still vulnerabilities that can be exploited by scammers. Blockchain technology and smart contracts can provide transparency and autonomy but they are immune to scams.
Avraham Eisenberg is cryptocurrency trader. He has exploited a decentralized cross-margin trading platform, Mango Markets rules to shiphon a substantial amount of money. He has been accused in the first US trial that involve crypto manipulation charges. He was found guilty by federal jurors in New York. He was accused for committing crypto scams such as commodities fraud, commodities manipulation, and wire fraud.
Futures contracts are financial agreements to buy or sell assets. Avraham Eisenberg is found to artificially inflated the price of futures contracts. He bought a significant amount of these contracts within a very short period. This led to a surge in demand and eventually rally in price. The surge was around 1,300% in just 20 minutes, which was extremely abnormal.
The formal declaration of the sentencing is scheduled for July 29. As he has been accused of multiple charges, the sentence also runs consecutively. For the wire fraud he faces 20 years and 10 years for each of the other charges.
Avraham Eisenberg, worked his way through the crypto scams of pumping the price of Mango’s token (MNGO) under a pseudonym. Not only Mango’s token, he also manipulated the price of contracts linkd to its value compared to a stablecoin called USDC. After that, he took advantage of a feature ‘borrow’ available in the exchange platform. This feature allows user to borrow against their cryptocurrency holdings. Eisenberg exploited this feature and borrowed US$110 million cryptocurrencies. He did not have any plan to return the borrowed amount.
Avraham Eisenberg tried to defend his wrongdoings. He mentioned that whatever he has done does not violate the exchange platform’s rule and is not an unethical practice. In the trial, his legal team has stated that their clients had capitalized on the options that the platform is offering.
Finally, Eisenberg agreed to return US$67 million to Mango Markets in exchange for immunity from further prosecution or asset freezing. Inspite of this, he got arrested in Puerto Rico while returning from Israel.
While the current case will be decided, the story of Avraham Eisenberg reveals the need for overhauling the regulatory framework governing the digital assets markets. It calls for the best oversight and governing mechanisms against manipulation and abuse while effectively managing the complexity of the decentralized ecosystem. In crypto market, where regulations and legal frameworks are still evolving, this trial may be understood being imprinted on the mind of jurisprudence a long time to come, mapping out the direction that future regulations will be shaping.
