US Lacks Authority to Prosecute DeFi Trades, Mango Markets Hacker’s Lawyer Argues
In a dramatic courtroom clash, lawyers representing Avraham Eisenberg, the alleged mastermind behind the $100 million fraud case involving Solana DeFi platform Mango Markets, argued that the United States lacks jurisdiction to prosecute DeFi trades. The dispute, which played out during opening statements before a Manhattan jury, revolved around the question of whether risky DeFi exploits like Eisenberg’s are subject to existing US criminal law.
Eisenberg’s defense attorney, Sanford Talkin, claimed that prosecutors would struggle to prove that the assets involved in the Mango Markets exploit were commodities or that Eisenberg engaged in commodity swaps. If the prosecution fails to establish these foundational facts, the commodities fraud and manipulation charges brought against Eisenberg would not be applicable to Mango Market transactions.
“They will try to tell you USDC is a commodity, even if MNGO is not,” Talkin argued. “But it is not. Nor are these swaps. So, the government can’t even get out of the gate on the first two counts of this indictment.”
On the other hand, US government attorneys characterized Eisenberg’s actions as a classic case of fraud in a modern technological context. They compared his exploit to the scam of selling a fake diamond ring and absconding with the money. Both sides attempted to explain the intricacies of the complex DeFi exploit to the jury, most of whom were New Yorkers with no specialized crypto knowledge.
Eisenberg’s exploit involved selling millions of dollars worth of perpetual futures on Mango Markets’ native token (MNGO) to another account under his control, artificially inflating its price. He then borrowed against his boosted MNGO perpetuals, ultimately leading to the depletion of Mango Markets’ treasury.
Days after the trades, Eisenberg admitted to his involvement but claimed that his actions were legal under existing laws, referring to it as “a highly profitable trading strategy.” In addition to the ongoing SEC investigation, Mango Labs and the CFTC have also filed separate lawsuits against Eisenberg.
It remains to be seen how the jury will consider the jurisdictional argument presented by Eisenberg’s lawyer and whether it will affect the outcome of the case.
Edited by Ryan Ozawa.