Bessie Liu

Mango Markets attacker Avraham &#8220;Avi&#8221; Eisenberg has been charged with commodities fraud and market manipulation by US prosecutors from the Southern District of New York. He was arrested in Puerto Rico on Monday.



The complaint, which was made public on Tuesday, said Eisenberg willfully and knowingly attempted to manipulate and defraud markets, enabling him to withdraw millions in multiple cryptocurrencies with no intention of returning the stolen assets.



During the attack in October 2022, Eisenberg <a href="https://blockworks.co/news/mango-markets-mangled-by-oracle-manipulation-for-112m" target="_blank" rel="noreferrer noopener">drained $110 million from the Mango Markets exchange</a>, which the US Federal Prosecutor is now taking exception to, alleging that he manipulated the price of a commodity by taking both sides of the transaction.



At the time, Ian Corp, an attorney at the Agentis law firm, told Blockworks that “it’s possible that the SEC and/or CFTC bring civil charges against them, but they would have to also prove that the Mango token was either a security or commodity.” In the complaint, the Assistant US Attorney states that &#8220;Perpetuals are &#8216;swaps'&#8221; under the Commodity Exchange Act.



Eisenberg riled some observers when he declared his move &#8220;a highly profitable trading strategy&#8221; in a tweet at the time.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Statement on recent events: I was involved with a team that operated a highly profitable trading strategy last week.&mdash; Avraham Eisenberg (@avi_eisen) <a href="https://twitter.com/avi_eisen/status/1581326197241180160?ref_src=twsrc%5Etfw">October 15, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Mango Markets is a Solana based cryptocurrency trading platform, where Eisenberg used oracle price manipulation techniques to withdraw and estimated $53.7 million in USD Coin (USDC) and $3.2 million in tether (USDT) and SOL.&nbsp;



The attack sent the price of Mango’s native token MNGO <a href="https://blockworks.co/news/mango-markets-exploit-plot-revealed">plummeting </a>by 50% on the day to roughly $0.02, 95% below its all time high of $0.50 set in September 2021.&nbsp;



A <a href="https://app.realms.today/dao/DPiH3H3c7t47BMxqTxLsuPQpEC6Kne8GA9VXbxpnZxFE/proposal/2NGgwYnh5rV4igUwr4sBaeRCTzkyyJ64habEaPraRWZx">proposal to transfe</a><a href="https://app.realms.today/dao/DPiH3H3c7t47BMxqTxLsuPQpEC6Kne8GA9VXbxpnZxFE/proposal/GYhczJdNZAhG24dkkymWE9SUZv8xC4g8s9U8VF5Yprne">r</a> $42 million USDC to cover re-imbursements for its users was l<a href="https://blockworks.co/news/mango-dao-readies-42m-to-make-users-whole">ater passed </a>by Mango governance.&nbsp;



Mango is not the only exploit attempted by Eisenberg.&nbsp;



The hacker had also left DeFi lending giant Aave, in $<a href="https://blockworks.co/news/aave-curve-bad-debt">1.7 million bad debt</a>.&nbsp;



At the time, Eisenberg accumulated an estimated 92 million in token loan of Curve Finance’s native token, CRV over a period of six days, then rather than paying back the loan, he allowed a total o<a href="https://blockworks.co/news/curve-stablecoin-crv-loan">f $63.6 million in USDC collateral to be liquidated.</a>



The price of Aave dipped as bad debt accrued, but recovered fully once liquidation was complete, it’s team confirmed that the deficit could easily be covered with the protocol’s treasury holdings. And the Aave community quickly&nbsp; implemented short-term action to prevent further exploits.&nbsp;



Eisenberg&#8217;s exploits have been hotly debated in the crypto community, but the pseudonymous &#8216;swapman&#8217;, a co-admin of Whalepool.io. said that even if Eisenberg’s actions are “justifiable, and morally acceptable. If the intent is clearly to steal, then it is unethical.”



Avraham Eisenberg did not immediately return a request for comment.



Updated Dec. 27, 2022 at 18:49 ET: Additional context throughout.



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Mango Markets Exploiter Avi Eisenberg Committed Fraud, Feds Say

Casey Wagner

<div id="highlights-block_625f14c5f378a" class="highlights">
 <ul>
 <li>Binance.US first said in September 2019 that Puerto Rico residents could access the exchange</li>
 <li>The announcement comes shortly after Binance’s US-based affiliate hit a valuation of $4.5 billion</li>
 </ul>
 
</div>



Binance.US has received a money transmitter license in Puerto Rico.



Cryptocurrency exchange Binance’s American partner announced the development Tuesday. Binance.US first moved in September 2019 to allow Puerto Rico residents access to the same services as American residents in a <a href="https://web.archive.org/web/20191213045543/https://support.binance.us/hc/en-us/articles/360034206652-Binance-US-Opens-Registrations-for-Puerto-Rico-Residents" target="_blank" rel="noreferrer noopener">now-deleted blog post</a>.



A spokesperson from Binance.US confirmed that residents of Puerto Rico have been able to access services on the exchange prior to the money transmitter license being granted. The spokesperson did not respond to inquiries about how the new license changes existing services.



&#8220;Puerto Rico, in particular, is an important market for the growth of crypto and we look forward to continuing to offer its residents secure, reliable, and low-fee access to a robust selection of tokens,&#8221; Binance.US CEO Brian Shroder said in a <a href="https://blog.binance.us/binance-us-receives-money-transmitter-license-in-puerto-rico/" target="_blank" rel="noreferrer noopener">statement</a> Tuesday. 



Any company where an “order of payment is received, including but not limited to, bank drafts, checks, personal money orders, or any other means of money transmission or payment, including those carried out by electronic transfer, wire, telephone, or any other medium to be transferred to a beneficiary” is required to obtain a money transmitter license in Puerto Rico, according to the <a href="https://nationwidelicensingsystem.org/slr/PublishedStateDocuments/PR-Money-Transmitter-License-Company-New-App-Checklist.pdf" target="_blank" rel="noreferrer noopener">Nationwide Multistate Licensing System and Registry Resource Center</a>. 



The new license marks Binance.US’ fourth this year. The exchange has secured accreditation in Connecticut, West Virginia and Wyoming since January. Not all states, however, require a license in order for an exchange to operate.&nbsp;



In March, Binance.US announced that it was available to Louisiana residents, meaning the exchange is now accessible in 45 US states.&nbsp;



“Each state, including Louisiana, has a unique set of requirements, and we are working to ensure that we will ultimately be able to operate in all 50 states,” Sidney Majalya, chief risk officer of Binance.US, said at the time. “We’re thrilled to offer our services in Louisiana, and like other states, look forward to working with state officials to demonstrate our compliance-first mindset.”&nbsp;



The Puerto Rico license comes after Binance.US hit a valuation of <a href="https://cms.blockworks.co/binance-us-valued-at-4-5b-after-200m-seed-round/" target="_blank" rel="noreferrer noopener">$4.5 billion</a>, following the close of a $200 million seed financing round earlier this month. Investors in the round included Circle Ventures, Foundation Capital, Gaingels, Gold House, Original Capital, RRE Ventures and VanEck.



Binance.US launched in September 2019 via a partnership with BAM Trading Services after Binance stopped serving US customers the same month.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



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Crypto Exchange Binance.US Secures Money Transmitter License in Puerto Rico

Sam Reynolds

<div id="highlights-block_60afbfade1c26" class="highlights">
 <ul>
 <li>Puerto Rico has its own tax authority that’s separate from the IRS, and preferential tax rates for those that have migrated from the mainland US has attracted many digital nomads and their wealth</li>
 <li>Some might advertise the island as a cryptocurrency paradise. The guidance on crypto taxation, however, isn’t that clear</li>
 </ul>
 
</div>



Location independent workers — digital nomads — often look to Asia as a place to escape the harsh weather of parts of the continental United States and the tax burdens of Uncle Sam. But, with the passage of two tax bills in 2012, the semi-autonomous territory of Puerto Rico has made a play for these monied migrants with promises of single-digit tax rates.&nbsp;



Under Act 22 of its local tax code, Puerto Rico offers full exemption from all local taxes on passive income to newcomers. Act 20, provides a 4% corporate tax rate and exemptions on dividends.



With the popularity of remote work, particularly in the digital assets industry, many have moved over to the island in order to get the dual benefits of living in the US while paying tax rates competitive with Asia.&nbsp;



There’s just one problem. Like the IRS in the mainland US, the Puerto Rican tax authority hasn’t issued definite guidance on crypto. Capital gains, as San Juan-based tax accountant and lawyer Luis Rodriguez explained, are taxed at a preferential rate of 4%, however, the tax authorities haven’t issued a formal position on how this relates to crypto.&nbsp;



“Up to this point, there hasn’t been a formal expression by the Puerto Rican treasury department about the treatment of crypto,” Rodriguez said during panel on taxation at the Consensus virtual event.



One interpretation of the code would treat crypto as an asset, Rodriguez explained, which is along the lines of the IRS’ <a href="https://cms.blockworks.co/outdated-irs-guidance-no-match-for-trillion-dollar-crypto-industry/" target="_blank" rel="noreferrer noopener">guidance issued in 2014</a>. It would be treated with a capital gain of 15%. This is lower than the normal tax rate Americans are used to, but still significantly higher than 4%. 



However, the Treasury Department <a href="https://cms.blockworks.co/us-treasury-report-crypto-transfers-of-10000/" target="_blank" rel="noreferrer noopener">said last week</a> that a crypto crackdown is coming as part of the Biden administration’s attempted overhaul of the tax system.



A report from the department specifically mentioned cryptocurrency and giving the IRS new tools to fight crypto tax evasion. This might mean that cryptocurrency is taxed as a separate asset class with a new taxonomy, or it might just mean that the tax authorities will be given additional firepower in their fight against tax cheats.&nbsp;



Regardless of the outcome, Puerto Rico will no doubt be following the news closely and aligning its tax code accordingly. It could be that this bucolic island which flies the US flag becomes a crypto paradise lost.