In a surprising turn of events, a U.S. federal judge has overturned the criminal convictions of Avraham Eisenberg, the alleged exploiter of the Mango Markets decentralized finance (DeFi) platform. The ruling marks a significant precedent in crypto-related legal cases, particularly those involving smart contract-based platforms.
Background: The $116 Million Mango Markets Exploit
In October 2022, Eisenberg allegedly manipulated the Mango Markets protocol — a Solana-based DeFi trading platform — to drain approximately $116 million in digital assets. Eisenberg executed a “highly profitable trading strategy” by manipulating the price of MNGO tokens, which he used as collateral to borrow against and ultimately withdraw user funds.
While Eisenberg returned $67 million in a settlement with Mango Markets, he was later arrested in Puerto Rico and charged with market manipulation and fraud by the U.S. Department of Justice.
Judge Rules No False Representation Was Made
On Monday, the presiding judge ruled that prosecutors failed to prove Eisenberg made any false representations to Mango Markets, which is an autonomous platform operated by smart contracts, not individuals.
“The case hinges on whether Eisenberg’s actions constituted fraud or whether he simply interacted with a permissionless protocol in a way that the code allowed,” the judge stated.
“The court finds insufficient evidence of criminal intent or deception,” the ruling added.
This is a crucial distinction in the world of decentralized finance, where smart contracts execute automatically without human discretion.
What This Means for DeFi Legal Frameworks
Legal experts are calling the ruling a landmark decision for the crypto industry. It raises major questions about how laws apply to autonomous blockchain systems, where users operate based on code, not traditional agreements.
“If the code permits it, is it still a crime? That’s the legal dilemma,” said Preston Byrne, a crypto-focused attorney.
The ruling reinforces the principle: ‘code is law’ — a foundational belief in many Web3 communities.
Industry Reactions and Implications
The DeFi community has reacted with a mix of relief and caution. While some view the decision as a victory for permissionless innovation, others worry it could encourage bad actors to exploit vulnerabilities without fear of legal consequences.
Mango Markets has yet to comment publicly, but Eisenberg’s legal team stated, “This case should never have been prosecuted in the first place.”
Final Thoughts
The overturned conviction of Avraham Eisenberg sets a powerful precedent in crypto law, highlighting the legal gray areas in DeFi protocol interactions.
As blockchain technology continues to evolve, regulators and developers alike must reconsider how justice is defined in a decentralized world.