Court Vacates Mango Markets Exploit Convictions Against Crypto Trader

Highlights:

• Judge Arun has cleared Eisenberg of fraud charges, as Mango Markets’ code was open and did not rely on personal input.
• The court ruled that smart contracts cannot be deceived due to their permissionless and automatic design.
• The platform shut down after legal issues and changes to borrowing terms by its DAO and team.

U.S. District Judge Arun Subramanian overturned charges related to fraud and manipulation filed against Avraham Eisenberg on May 23. The judge ruled that the evidence did not prove Eisenberg made false statements to Mango Markets. He also dismissed a third charge, further weakening the government’s case.

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U.S. court overturns Eisenberg’s Mango Markets fraud convictions

A U.S. federal court has overturned fraud and market manipulation convictions against Avraham Eisenberg, ruling there was insufficient evidence that he made false statements to the Solana-based decentralized…

— CoinNess Global (@CoinnessGL) May 24, 2025

Eisenberg was found guilty last year of controlling the price of the MNGO token, the utility and reward token for Mango Markets. Afterwards, he got $110 million from the platform by offering his inflated trading gains as collateral.

He raised the cost of MNGO by a massive 1,300% in a very short period. Prosecutors claimed he deceived the smart contracts of the platform. However, his defense argued that he had simply used permissionless code. Moreover, they argued that the accused did not make any false claims in his activities. Mango Markets allowed open access, meaning users could interact with it directly.

Judge Subramanian accepted this explanation and stated that Mango Markets operated automatically. He explained that the system’s design did not rely on trust or personal input. Therefore, Eisenberg’s actions could not legally count as deception. The judge also found the trial should not have been held in New York, as the accused had executed the trades in Puerto Rico. The Department of Justice will have to determine if it will refile the charges. Authorities are now showing signs of less enforcement regarding cryptocurrencies.

Ruling Redefines Boundaries Around DeFi Exploits

The Mango Market exploit was among the first major cases related to decentralized finance activity. The judge’s decision set a new boundary for what can count as fraud in such environments. According to the ruling, smart contract platforms do not involve trust-based interactions. 

The defense said Eisenberg was only using the features that were available on the platform. Even though his actions were extreme, they stuck to what the code was made for. In agreement, Judge Subramanian pointed out that using code in unauthorized ways cannot be treated the same as making false statements. The decision might guide court judgments in similar cases in the future.

This decision shows the difficulty of applying traditional fraud laws to decentralized systems. As DeFi platforms grow, these legal questions will continue. Courts may need to look at how these platforms are structured. This matter was determined by analyzing the facts, source code conduct and legal terminology, ignoring the results of the trades.

Mango Markets Closure After Exploit and Eisenberg’s Unrelated Sentencing

Mango Markets stopped operating in January 2025. The company kept facing legal issues and made tough inner decisions. Its DAO and development team voted to make borrowing more expensive. They raised interest rates and changed collateral requirements, which took effect on January 13.

Mango Markets will be shutting down
It is time for users to close their positions

Mango v4 & Boost are winding down. Most borrowing on Mango will be economically unviable going forward

Proposals are live & become executable on January 13, Monday 8PM UTC

Details below⬇️

— Mango (@mangomarkets) January 11, 2025

Mango DAO settled with two federal agencies and agreed to several terms last year. It paid $1.2 million in civil penalties to the SEC and CFTC. Moreover, it agreed to remove MNGO tokens from all exchanges and destroy them. The platform launched in August 2021 but could not recover from the exploit. Mango Markets asked users to close all positions before the platform closed down. These events marked the end of its operations.

Although the court has vacated the conviction tied to the Mango Markets exploit, the trader will remain in custody. He pleaded guilty, and the court sentenced him to be in custody of child pornography. On May 1, the court imposed a sentence of nearly four years in prison for that offense.

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