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The idea that “code is law” just won in a court of law.
Avraham “Avi” Eisenberg, who exploited the Solana-based Mango Markets protocol in 2022, was sentenced last month to over four years in prison for possession of child sexual abuse material.
But Eisenberg was also supposed to be sentenced that day for defrauding Mango Markets.
Prosecutors had sought a combined sentence of up to eight years for the child sexual abuse material and the fraud charges.
He had pleaded guilty to the former, and fought the latter in a 2024 trial.
A jury found Eisenberg, 29, guilty of fraud.
But he requested a new trial, arguing the government failed to prove that he had ever committed a crime in the Southern District of New York, where he was tried.
The government had also failed to prove MNGO tokens were commodities; that Eisenberg manipulated the price of MNGO perpetuals; that he defrauded Mango Markets; and that he had used an interstate wire, his attorneys said.
At his sentencing hearing, Judge Arun Subramanian said there was a “non-zero chance” he would grant Eisenberg’s request.
On May 23, it was granted.
The judge has vacated Eisenberg’s convictions on commodities fraud and commodities manipulation charges, and acquitted Eisenberg of his wire fraud charge.
Indeed, the government had failed to prove Eisenberg ever committed a crime in the Southern District of New York, the judge wrote in a 35-page order last week.
More interestingly, however, the judge also said Eisenberg couldn’t have defrauded Mango, a self-executing DeFi protocol, because he had merely taken advantage of a flaw in its design, and the service lacked any terms that forbade his behaviour.
Eisenberg exploited a flaw in Mango Markets’ design by trading with himself to inflate the value of the protocol’s token, MNGO.
Prosecutors say he was then able to use MNGO perpetuals as collateral to borrow crypto worth about $110 million from the protocol’s users with “no intention of repaying them.”
“There was no evidence at trial that Mango Markets required any user to promise that they would repay funds as a condition of borrowing against their assets, so this isn’t a case where ‘a contractual promise was made,’” the judge wrote.
Moreover, “there was no evidence that the ‘borrow’ function on Mango Markets entailed an obligation to repay—or any other obligation for that matter—even if that’s how the term is conventionally understood.”
The judge continued:
“In other contexts, a contractual agreement to ‘borrow’ might give rise to a claim of fraud if an individual intentionally misrepresents or omits something relevant to the terms of the agreement or the parties’ negotiations.”
Here, however, “there were no terms and no negotiations. There was just the word ‘borrow.’ That word could have been ‘access collateral,’ ‘utilize assets,’ or anything else for that matter.”
The government argues that by hitting the ‘borrow’ button, Eisenberg essentially “created the false impression that his collateral was valuable.”
That doesn’t check out, according to the judge.
“As Eisenberg points out, the platform automatically measured the actual value of his collateral, so he didn’t represent anything untrue.”
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Pining for the good old days when hacks were a dime a dozen.
Re the Cetus situation on Sui, unfortunately DeFi exploits are proof of use. If no one is exploitering, probably no one is using... eth used to get one exploit a day, now its so lonely out there
— chainyoda (@chainyoda) May 22, 2025
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