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Mango Markets market manipulators on trial, setting a precedent for the "Code is law" era?

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Mango Markets market manipulators on trial, setting a precedent for the "Code is law" era?

Coindesk reported that U.S. authorities will commence a two-week criminal trial starting today, April 9, against Avi Eisenberg, a user of the DeFi platform Mango Markets who exploited vulnerabilities. This trial will test how the U.S. defines criminal activities such as cryptocurrency fraud or market manipulation that occur in the DeFi sector.

Review of the Mango Markets Incident

In December 2022, Avraham Eisenberg was arrested in Puerto Rico by the FBI for allegedly manipulating the spot and derivative markets of Mango Markets, a popular DeFi platform on Solana at the time, and making over $116 million.

Attacker of DeFi platform Mango Markets Arrested in Puerto Rico! Charged by FBI with Commodities Fraud, Manipulation

It is reported that Eisenberg is accused of manipulating the price oracle in October of that year to boost the platform's native token MNGO and borrowing over $100 million against that token, leading to insolvency of the platform.

He stated that these were high-profit trading strategies he discovered:

All of my actions were legal, public market behaviors, done in accordance with the design of the protocol itself.

Mango Markets Market Manipulator to Stand Trial

Currently, the New York Federal Court will conduct a criminal trial against Avraham Eisenberg, the attacker of Mango Markets, on charges of fraud, market manipulation, and misleading statements. The trial will first focus on his illicit activities profiting from vulnerabilities in Mango Markets and is expected to last for two weeks.

DeFi Platform Mango Hacked｜Bull and Bear Markets, Price Manipulation, Drained $116 Million in Assets

The trial was originally scheduled for December 4th of last year but was postponed to April 8th of this year at the request of Eisenberg's legal team. It is reported that those involved in telecommunications fraud could face up to 20 years in prison.

Of note, Eisenberg's trial will test law enforcement's ability to define complex cryptocurrency misconduct as criminal and provide clear interpretations on related terms, behaviors, and legality.

In other words, the outcome of this case will have a significant impact on the DeFi sector and may establish legal precedents for the principle of "Code is law."

The Ongoing Debate of "Code is Law"

With the advancement of blockchain and machine learning technologies, the regulatory form of "Code is law" has been a subject of ongoing debate:

Some believe that code can, in many cases, replace traditional law and serve as the basis for current online worlds, especially in the blockchain field; however, others claim that advocates simply want to use smart contracts to amass wealth without repercussions.

Previously, the sudden drop in the governance token $YFI of DeFi protocol Yearn.finance led to liquidations exceeding $38 million on dYdX, sparking discussions across various sectors on whether it constituted illegal market manipulation, with no definitive answer to date.

$YFI's Sharp Rise and Fall, Liquidation Exceeds $30 Million, dYdX Accuses Market Manipulation, Reports to FBI

As part of the DeFi sector, Mango Markets operates without strict control of centralized financial platforms but rather executes transactions automatically through smart contracts; yet, it has unfortunately fallen victim to market manipulation.

Therefore, the outcome of this case will undoubtedly impact the future design, interpretation, and legal compliance of smart contracts in DeFi.