A U.S. federal judge has overturned fraud convictions against Avraham Eisenberg, the trader behind the $110 million Mango Markets case. The unexpected decision has left legal experts and crypto insiders scrambling to understand its implications.
The ruling cuts to the heart of a raging debate in crypto circles: When code is law, can breaking a protocol’s intended rules still be considered illegal? For Eisenberg, who openly bragged about his “highly profitable trading strategy” before his arrest, the answer appears to be no, at least for now.
Court rules mango markets case wasn’t fraud—just “poorly designed code”
On Friday, U.S. District Judge Arun Subramanian vacated Eisenberg’s convictions for commodities fraud and market manipulation, dealing a significant blow to the Department of Justice’s (DOJ) case. The judge ruled that Mango Markets’ “permissionless and automatic” design meant Eisenberg couldn’t have deceived the protocol in a legal sense.
“There was insufficient evidence of falsity,” Judge Subramanian wrote in his decision. “The defendant’s actions were a use of the protocol, not a misuse.”
Eisenberg, who called himself an “applied game theorist,” was convicted in 2024 for manipulating Mango Markets’ MNGO token price by 1,300% in minutes, then borrowing $110 million against the inflated collateral. Prosecutors argued this was fraud, but Eisenberg’s defense team maintained he simply exploited a flawed system.
“Mango Markets was open-source, and the rules were transparent,” said Eisenberg’s attorney, Brian Klein. “This wasn’t fraud—it was a loophole in a system that lacked safeguards.”
Legal experts divided on implications for defi regulation
The ruling has sparked fierce debate among legal scholars. Some argue it sets a dangerous precedent, while others believe it clarifies the boundaries of DeFi trading.
“If this stands, it means DeFi protocols are responsible for their own security,” said Preston Byrne, a crypto-focused attorney. “You can’t cry fraud when someone plays by the rules you coded.”
However, SEC Commissioner Caroline Crenshaw warned the decision could embolden bad actors: “This ruling risks creating a Wild West where exploitative behavior goes unpunished simply because a protocol is poorly designed.”
The Mango Markets case has been closely watched as a test of how existing fraud laws apply to DeFi. With this ruling, future prosecutions may need to prove intent to deceive, not just profit from a protocol’s vulnerabilities.
Mango Markets case: Eisenberg still imprisoned on unrelated charges
While Eisenberg scored a legal victory in the Mango Markets case, he remains incarcerated due to a separate conviction. In May 2024, he was sentenced to nearly four years in prison after pleading guilty to possessing child pornography charges stemming from evidence uncovered during his arrest.
The DOJ must now decide whether to appeal the dismissed fraud charges. Legal analysts suggest the agency may refocus its efforts on civil actions, including pending cases from the SEC and CFTC.
What’s next for mango markets and defi security?
The Mango Markets exploit exposed critical weaknesses in DeFi lending models. Since the 2022 incident, the platform has rebranded and implemented stricter safeguards, but the legal fallout continues.
“This case highlights the tension between innovation and accountability in DeFi,” said Cornell Law professor Angela Walch. “If courts won’t intervene, the burden falls on developers to bulletproof their systems.”
For now, the Mango Markets case serves as both a cautionary tale and a legal milestone—one that could redefine how smart contract interactions are interpreted under U.S. law.
Key takeaways from the ruling:
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No fraud in “code is law” systems: The court found Eisenberg’s actions didn’t constitute fraud under current statutes.
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Venue matters: The judge rejected New York as the trial location, weakening prosecutors’ jurisdictional claims.
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Regulatory gaps persist: The ruling underscores the need for clearer DeFi regulations to prevent future exploits.
As the crypto industry digests this decision, the Mango Markets case will influence DeFi legal battles for years to come.
