New York— A federal judge appointed a 15-person jury to try crypto trader Avi Eisenberg for criminal fraud and manipulation on Tuesday. The panel includes a rare book seller, an elementary school music director, and two financial specialists.
The two-week trial will examine if Eisenberg breached the law when he used a "highly profitable trading strategy" to hobble Mango Markets, a popular Solana blockchain cryptocurrency betting site, in October 2022
The trial marks a progression in the government's efforts to control alleged crimes in decentralized finance (DeFi), a crypto trading sector based on "code is law." Mango Markets is less regulated than Coinbase. Instead, smart contracts handle transactions, borrowing, and loans.
Eisenberg is accused of fraudulently manipulating Mango Markets' futures contracts by manipulating the MNGO token price and borrowing all of Mango's deposits. He stole $110 million in cryptocurrency from the website and returned some in exchange for a promise from Mango's backers not to prosecute him.
Negotiation or extortion? In court on Monday, prosecution and defense previewed Mango founder Dafydd Durairaj's evidence. Prosecutors said he asked a ransomware negotiator for help after Eisenberg's trade. This could help the jury realize that Durairaj saw the conversations as a hostage situation that could rupture at any time, not a "arm's-length" bargain between two parties.
Judge Arun Subramanian partially agreed with Eisenberg's defense team and advised the government not to mention the ransomware negotiator to avoid prejudicing the jury. The prosecutors might proceed if the defense claimed the negotiations were "arm's length," he said.
The parties debated "manipulation," its usage by witnesses and its appearance in online terms-of-service papers. They disagreed on how Mango Markets merchants were "obliged" to operate. Was that word legal or referring to smart contract transaction outcomes?
Jargonistic disputes anticipate the difficulties of a trial that will test the government's recent practice of presenting complicated crypto crimes as simple fraud. The feds used that strategy in Sam Bankman-Fried's prosecution last year and Terraform Labs and Do Kwon's civil fraud action.
Eisenberg's case may go deeper into permissionless blockchain token trading's conceptual and practical implications. His is the first federal criminal trial of a DeFi trader accused of breaking U.S. law in a sector formerly considered untouchable.
Inside court The prospective jurors were uneasy about spending Eclipse Day on the 15th floor of a federal courtroom. One said she should have watched the generational event at a science museum, not a jury box. The judge promised to turn out the lights at the event's peak, but he didn't.
Many brought eclipse glasses. They used them briefly while the court and lawyers discussed peremptory strikes. The U.S. Marshal, reporters, and prospective jurors looked out the towering windows at the half obscured sun.
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