SEC Charges Alleged Mango Exploiter With Market Manipulation

Agency Calls MNGO a “So-Called Governance Token” and a Security

By: Aleksandar Gilbert Loading...

SEC Charges Alleged Mango Exploiter With Market Manipulation

The U.S. Securities and Exchange Commission has charged infamous degen Avraham Eisenberg with market manipulation that cost Solana protocol Mango Markets $116M.

In the complaint, the SEC refers to Mango Markets’ “so-called governance token,” MNGO, as a security. MNGO Fell on the news, dropping more than 8%.

“With this, SEC declares war on pretty much all governance tokens,” Gabriel Shapiro, general counsel at Delphi Labs, wrote on Twitter.

Eisenberg was arrested in Puerto Rico last month in connection with his alleged manipulation of MNGO. He was previously charged by the federal prosecutors in New York and the Commodities Futures Trading Commission.

Just before Eisenberg’s exploit, MNGO was trading for less than 4 cents. On Oct. 11, however, he was able to manipulate the price of the token, which briefly shot up to $0.91, and borrow $116M in various crypto tokens against the inflated value of his MNGO holdings. Mango Markets was left insolvent.

Attacker Behind $116M Mango Markets Exploit Eyes $65M Bounty

Attacker Behind $116M Mango Markets Exploit Eyes $65M Bounty

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The Defiant The Defiant

He later returned about $67M in exchange for a promise the Mango team would not pursue legal action. But he famously took to Twitter to gloat over his “highly profitable trading strategy.”

“I believe all of our actions were legal open market actions, using the protocol as designed, even if the development team did not fully anticipate all the consequences of setting parameters the way they are,” he wrote on Twitter.

Law enforcement disagrees.

The U.S. Attorney’s Office for the Southern District of New York in December charged Eisenberg with one count of commodities fraud and one count of commodities manipulation. Shortly thereafter, he was sued by the CFTC.

Eisenberg, 27, has been detained in Puerto Rico and will soon be moved to New York, according to the SEC.

In its complaint, the SEC argues MNGO is an “investment contract” offered by the Mango Markets team, making the token a security subject to SEC registration and oversight. SEC regulations are more onerous than those of commodities, and the crypto industry has fought any suggestion that cryptocurrencies and governance tokens are de facto securities.

“As our action shows, the SEC remains committed to rooting out market manipulation, regardless of the type of security involved,” David Hirsch, chief of the SEC’s Crypto Assets and Cyber Unit, said in a prepared statement.

Eisenberg said he acted as part of a team.

In a news release, the SEC said it was investigating other potential securities laws violations as well as “other entities and persons relating to the alleged misconduct.”

Shortly after the Mango exploit, Eisenberg telegraphed, then carried out, an attack on Aave that left the lending protocol with $1.6M in bad debt. Prosecutors and regulators have not clarified whether they intend to charge Eisenberg in connection with his trades on Aave.