(Bloomberg) — Federal jurors in New York heard sharply contrasting arguments on whether a trader manipulated the Mango Markets cryptocurrency exchange to steal $110 million or executed a perfectly legal strategy that was permissible under the rules of the platform.

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Prosecutors wrapped up their trial of Avi Eisenberg, 28, by arguing Wednesday he used fake trades of Mango’s token, known as MNGO, to manipulate futures contracts on Oct. 11, 2022, which boosted the value of swaps by 1,300% in 20 minutes. He then allegedly stole platform assets by “borrowing” against those inflated contracts on the exchange.

“This was old-fashioned manipulation and fraud,” Assistant US Attorney Peter Davis said during closing arguments. “He pumped the price and lied so he could steal people’s money.”

The trial, which began last week, is the first time a US jury will decide whether someone manipulated a crypto market. Prosecutors argued that traditional criminal laws apply, but defense lawyers say Eisenberg followed exchange rules that didn’t offer the same protections as other financial markets.

Jurors deliberated for about an hour Wednesday before ending for the day without a verdict. On Thursday, they will resume weighing the charges against Eisenberg — commodities fraud, commodities manipulation and wire fraud.

‘Your Own Risk’

Eisenberg attorney Brian Klein used his summation to argue his client “engaged in a successful and legal trading strategy, one in which he put his own money at risk.” Eisenberg, Klein said, “wholly complied” with smart contracts that controlled the decentralized finance platform, which only warned users: “This is unaudited software, use it at your own risk.”

Klein said Eisenberg doesn’t dispute that he made a series of trades taking opposing long and short positions.

“It’s not illegal to take big risks,” Klein argued.

Mango Markets, which lets people borrow, lend and trade cryptocurrencies, was overseen by a decentralized autonomous organization, or DAO. Days after his big haul, Eisenberg agreed to return $67 million in crypto in exchange for the DAO not pursuing his prosecution or freezing his remaining assets.

One juror who has worked on Wall Street smiled when Davis asked the panel to imagine working at a bank and telling a supervisor: “I just executed a great trade, and I’m going to give half of it back.”

Eisenberg left Puerto Rico, where he was living, soon after his Mango trades and flew to Israel. When he returned to Puerto Rico on Dec. 26, 2022, US agents arrested him. He’s been in jail ever since, as a judge ruled he poses a risk of fleeing before trial.

Web Searches

In the days before hitting Mango Markets, Eisenberg searched the web for terms like “elements of fraud” and “statute of limitations market manipulation,” Davis said. He later searched for information on FBI surveillance and extradition from Israel.

“This web history is crushing proof of the defendant’s guilt,” Davis said. “He knew that everything he did was illegal and he did it anyway.”

Eisenberg executed some trades by falsely using the identity of a Ukrainian woman after buying her login information, Davis said. He also manipulated the price of futures contracts based on the relative value of MNGO and a stablecoin called USDC, the US charges. He falsely “pumped” the price of those contracts as set by computer programs known as oracles, the prosecutor said.

“The more he pumped, the more he could steal,” Davis said.

In his closing argument, defense lawyer Klein said Eisenberg didn’t steal from Mango Markets when he hit the “borrow” button on the platform. Klein said Eisenberg withdrew his initial investment and trading profits he made from the site.

“What he kept was the profit and what he returned was the borrow,” Klein said.

He said Mango Markets didn’t require personal identifying information.

“Mango Markets didn’t care where you are or who you are,” Klein said. “You could trade with yourself all day long.”

The smart contract “controlled, and it operated the way it was supposed to,” the defense lawyer said.

The case is US v. Eisenberg, 23-cr-00010, US District Court, Southern District of New York (Manhattan).

(Updates with jury deliberations in fifth paragraph)

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