NEW
YORK
–
Crypto
trader
Avi
Eisenberg’s
criminal
fraud
and
manipulation
trial
will
open
Tuesday
after
a
federal
judge
seated
a
15-person
jury
that
includes
a
seller
of
rare
books,
an
elementary
school
music
director
and
at
least
two
finance
professionals.
Expected
to
run
for
two
weeks,
the
trial
will
determine
whether
Eisenberg
broke
the
law
when
in
October
2022
he
deployed
a
self-described
“highly
profitable
trading
strategy”
that
crippled
Mango
Markets,
the
once
popular
venue
for
betting
on
cryptocurrencies
on
the
Solana
blockchain.
The
trial
represents
an
evolution
in
the
government’s
attempts
to
police
alleged
crimes
in
decentralized
finance
(DeFi),
a
sector
of
the
crypto
trading
space
governed
by
the
notion
that
“code
is
law.”
Mango
Markets
is
not
tightly
controlled
like
its
counterparts
in
centralized
finance,
like
Coinbase.
Instead,
trades,
borrowings
and
loans
execute
on
smart
contracts.
Eisenberg
is
accused
of
illegally
gaming
Mango
Markets’
futures
contracts
by
manipulating
the
price
of
the
MNGO
token
and
then
borrowing
effectively
all
of
Mango’s
deposits
against
his
position.
He
walked
away
with
$110
million
in
cryptocurrencies
other
people
had
deposited
on
the
platform,
later
returning
a
portion
of
that
in
exchange
for
a
promise
that
Mango’s
backers
would
not
seek
his
prosecution.
That
promise
was
not
kept.
Negotiation
or
extortion?
In
court
on
Monday,
prosecutors
and
defense
teased
upcoming
testimony
from
Mango’s
founder,
Dafydd
Durairaj.
He
spoke
with
a
ransomware
negotiator
for
assistance
in
the
wake
of
Eisenberg’s
trade,
prosecutors
said.
This
fact,
they
argued,
could
help
the
jury
understand
that
Durairaj
did
not
view
the
negotiations
as
an
“arm’s-length”
deal
between
two
parties,
but
rather
a
hostage
situation
that
could
implode
at
any
time.
Judge
Arun
Subramanian
sided
partially
with
Eisenberg’s
defense
team
and
told
the
government
not
to
bring
up
the
ransomware
negotiator,
lest
it
prejudice
the
jury.
But
he
said
if
the
defense
opened
the
door
by
arguing
the
negotiations
were
“arm’s
length,”
the
prosecutors
could
walk
through
it.
The
parties
sparred
over
the
word
“manipulation,”
its
potential
use
by
witnesses
and
its
presence
in
online
terms-of-service
documents.
They
also
clashed
over
the
phrasing
of
what
traders
on
Mango
Markets
were
“obliged”
to
do
when
operating
on
the
site.
Was
that
word
a
legal
concept,
or
rather
a
reference
to
the
outcomes
of
executing
a
transaction
on
a
smart
contract?
Arguments
over
jargonistic
minutiae
foreshadow
the
complexities
ahead
in
a
trial
that
will
test
the
government’s
recent
strategy
of
presenting
knotty
crypto
misdeeds
as
simple
cases
of
fraud.
The
feds
took
that
tactic
in
last
year’s
prosecution
of
Sam
Bankman-Fried
as
well
as
in
the
recent
civil
fraud
case
against
Terraform
Labs
and
Do
Kwon.
But
Eisenberg’s
case
delves
perhaps
even
deeper
into
the
philosophical
and
practical
questions
about
trading
tokens
on
permissionless
blockchains.
His
is
the
first
federal
criminal
trial
to
involve
a
DeFi
trader
accused
of
breaking
U.S.
law
in
a
sector
that
once
viewed
itself
as
beyond
its
reach.
Inside
the
courtroom
The
prospective
jurors
sounded
none
too
pleased
to
spend
Eclipse
Day
on
the
15th
floor
of
a
federal
courtroom.
One
remarked
she
was
supposed
to
be
watching
the
generational
event
at
a
science
museum,
not
a
jury
box.
At
one
point
the
judge
said
he
would
turn
off
the
lights
during
the
event’s
pinnacle,
which
he
did
not.
More
than
a
few
came
ready
with
eclipse
glasses.
They
did
get
to
use
them,
if
only
for
a
few
minutes,
while
the
judge
and
lawyers
sidebarred
over
peremptory
strikes.
Prospective
jurors,
reporters
and
even
the
U.S.
Marshal
took
turns
peering
out
the
tall
windows
at
the
partially
covered
sun.
“You
can
see
it
again
in
20
years,”
the
Judge
later
told
the
courtroom.
