he Commodity Futures Trading Commission today filed a civil enforcement action in the U.S. District Court for the Southern District of New York charging Avraham Eisenberg with a fraudulent and manipulative scheme to unlawfully obtain over $110 million in digital assets from a purported decentralized digital asset exchange. This is the CFTC’s first enforcement action for a fraudulent or manipulative scheme involving trading on a supposed decentralized digital asset platform, and its first involving a scheme that is sometimes called “oracle manipulation.” CFTC Press Release
Avraham Eisenberg is alleged to have participated in a scheme to steal approximately $110 million by manipulating the price of MNGO Perpetuals on Mango Markets, a decentralized cryptocurrency exchange. According to the government's criminal complaint, Eisenberg used an account he controlled on Mango Markets to sell and then buy a large amount of Perpetuals for MNGO and engaged in a series of large purchases of MNGO to increase its price relative to USDC, which caused the price of MNGO Perpetuals on Mango Markets to increase significantly. As a result of the market manipulation, Eisenberg was able to borrow and withdraw approximately $110 million worth of various cryptocurrencies from Mango Markets using the increased value of the MNGO Perpetuals he had purchased as collateral. When Eisenberg ceased manipulating the price of MNGO Perpetuals, the price fell significantly, causing other investors with deposits on Mango Markets to lose much or all of their deposits. Reuters Reports
Lot's of questions swirling in the space about whether FTX will be charged criminally. So what factors do federal prosecutors generally consider when deciding whether to pursue criminal charges against a business organization? The “Principles of Federal Prosecution of Business Organizations” in the Justice Manual describe specific factors that prosecutors should consider in conducting an investigation of a corporation, determining whether to bring charges, and negotiating plea or other agreements." These factors include “the adequacy and effectiveness of the corporation’s compliance program at the time of the offense, as well as at the time of a charging decision” and the corporation’s remedial efforts “to implement an adequate and effective corporate compliance program or to improve an existing one.” DOJ Memo
Attorney General Report to the White House on Crypto Criminal Regulation Recommends Amendments to 18 U.S.C. § 1960 (Unlicensed Money Transmitting Businesses). Let's discuss those proposed amendments regarding range of punishment and fines. Section 1960’s penalty provisions: "Under existing law, violations of § 1960 are punishable by a maximum of five years’ imprisonment, a term materially less than that prescribed for analogous fraud (20 or 30 years) and money laundering statutes (10 or 20 years)." "Enforcement efforts would benefit from increasing the statutory maximum sentence to 10 years (from five) and by adding an enhanced penalties provision, under which individual criminal fines would double—and corporate criminal fines would triple for violations involving a money transmitter’s business of more than $1 million in a 12-month period to reflect the seriousness of the conduct at issue and allow for sentences more in line with the Guidelines range called for by the Sentencing Commission."
Federal jury returned a guilt verdict against defendant for "money laundering and operating an unlicensed money transmitting business as part of a scheme to launder the purported Bitcoin proceeds of drug trafficking." "The verdict followed a four-day trial before United States District Judge Pamela K. Chen. When sentenced, Goklu faces up to 25 years in prison." “The defendant offered his customers the ability to launder their criminal proceeds, remain anonymous and conceal where their Bitcoin was coming from so they could continue to engage in drug trafficking and other crimes while avoiding law enforcement detection,”
"As proven at trial, in July 2018, DEA special agents identified an advertisement posted on localbitcoins.com where an individual with the username “Mustangy” offered to purchase up to $99,999 worth of bitcoins (“BTC”), ... [and] convert them into U.S. currency for a fee. "A DEA Special Agent acting in an undercover capacity (the “UC”) began exchanging encrypted text messages with defendant to arrange in-person exchanges of BTC to U.S. currency."
"The UC and the defendant subsequently met and engaged in seven transactions or attempted exchanges of BTC to cash over a nine-month period"