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A crypto trader who exploited code on the Mango Markets DeFi platform maintains that he only did what the code allowed him to do, and that “code is law”.
Arrested and accused
Cryptocurrency trader Avraham Eisenberg has been arrested in Puerto Rico and charged with fraud by the US Attorney's Office in Manhattan in connection with his alleged exploitation of decentralised finance platform Mango Markets in October.
The trader is accused of using two accounts he controlled to manipulate the price of Mango perpetual swaps, which are futures that allow traders to keep their positions open, and then using the swaps to borrow and withdraw approximately $100 million worth of various tokens from the deposits of other investors on Mango Markets.
A legal trading strategy?
Despite the largely unregulated nature of DeFi, Eisenberg is facing legal consequences for his alleged fraudulent activities, which he had previously boasted about on social media as a "highly profitable" and legal trading strategy.
Eisenberg had been openly discussing his activities on Twitter with over 40,000 followers, claiming that he was pushing the DeFi industry to improve its risk controls.
However, many of the strategies Eisenberg used, such as generating trades to artificially inflate the price of a cryptocurrency and then borrowing against the artificially higher-valued asset, are considered manipulation in traditional markets and are illegal.
Code is law?
Despite this, the decentralised autonomous organisation (DAO) that runs Mango Markets agreed to allow Eisenberg to keep almost half of the over $100 million in assets he obtained in exchange for releasing the rest of the funds. Eisenberg remained convinced that he had done nothing wrong.
Eisenberg's claims of innocence may be rooted in the "code is law" philosophy of DeFi, which holds that the ultimate authority in cryptocurrency is the underlying computer code of most projects. According to this belief, if the code permits a trade to be executed, it is considered legally binding within the world of cryptocurrency. This theory is often cited by proponents of DeFi as a justification for their actions.
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