What Does Mango Markets Exploiter Avi Eisenberg's Arrest in Puerto Rico Mean for DeFi? - Ep. 441
Gabriel Shapiro, general counsel at Delphi Labs, and Collins Belton, managing partner at Brookwood P.C., dive into the controversial case of Avi Eisenberg, the self-described “applied game theorist” who was arrested in Puerto Rico on Dec. 26 on market manipulation and fraud charges. The two crypto lawyers discuss the case’s potential impact on DeFi and DAO governance — and whether “code is law” stands a chance in the courtroom.
Show highlights:
whether Avi’s manipulation of the markets constitutes fraud
debating the crypto maxim “code is law”
whether it’s wrong to use DeFi code in a “smarter way”
how the Mango Markets exploit happened due to poor governance management
whether crypto should be regulated from the securities angle or the commodities angle
the consequences of Avi’s arrest for the DeFi space
whether MEV could constitute market manipulation, even if it’s democratized for everybody
the role of DAOs and whether early-stage projects should maintain some level of centralization
how DAOs could be designed to have better mechanisms in order to deal with potential issues
whether members of the Mango Markets DAO are liable because of their role in designing the system
how Avi was “naive” to think he could avoid legal liability by returning the funds
why Gabe thinks credit protocols are socially positive and why he hopes that prosecutors won’t “throw everyone in jail”
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Links
Guests:
Gabriel:
Twitter
Delphi Labs
Gabriel’s Twitter thread on the case
Previous appearances on Unchained:
The SEC's Lawsuit Against Ripple and 2 Execs: What You Need to Know
Collins:
Twitter
LinkedIn
Previous appearances on Unchained:
How the Greatest Decentralizing Force for Crypto Projects Is the SEC
Episode Links:
Previous coverage of Unchained on Avi Eisenberg and the Mango Markets exploit:
The Mango Markets Attacker on Whether His 'Trade' Was Ethical or Not - Ep. 413
The Chopping Block: 'Code Is Law' Is 'Obviously Not How Anything Works Ever'
The Chopping Block: SBF Wants to Win in the Court of Public Opinion. Will He? - Ep. 428
Mango Markets exploit
Explanation
Avi’s “Highly profitable trading strategy” Twitter thread
Unchained:
Mango Markets Exploiter Arrested on Market Manipulation Charges
Mango Markets Exploiter Gets Liquidated But Leaves Aave With ‘Excess Debt’
Mango Markets $42M Reimbursement Proposal Passes
Mango Markets Exploiter Returns $67M After Revealing His Identity
Mango Markets Hacker Proposes Keeping $70M ‘Bad Debt’ As Bounty
Solana’s Mango Markets Sees $100M Drained in DeFi Exploit
Chaindebrief: How Manipulation On AAVE And CURVE Went Wrong, Attacker Got Rekted Instead
The Defiant: Another Fork Bites the Dust: The Looming Fall of Fortress DAO and the Perils of Off-Chain Governance
Karlstack: EXCLUSIVE: The Man Who May Have Milked $100+ Million from Mango Markets
CoinDesk:
The Impact of Avraham Eisenberg’s Case on the Future of Crypto
Mango Markets Exploiter Eisenberg Arrested in Puerto Rico
Mango Exploiter's Funds Get Liquidated After Roiling Aave Using $20M of Borrowed Curve Tokens
Complaint
CNBC: Decoding The Avraham Eisenberg Arrest And Its Impact On Crypto Bug Bounties, White Hat Hackers
Decrypt: Mango Markets Attacker Avraham Eisenberg Arrested, Charged With 'Market-Manipulation Offenses'
Protos: Who is Avraham Eisenberg and why is he all over Crypto Twitter?
Crypto Briefing: Curve Whipsaws 75% as DeFi Degens Squeeze Avraham Eisenberg
New Filing: CFTC charges Avi Eisenberg
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Tornado Cash BANNED By OFAC... Is this the War on Crypto?
On Monday, the U.S. Treasury Department made a smart contract illegal.
They can do that??
David walks you through the news, with multiple interviews from Jerry Brito and Collins Belton, two experts in the matter.
Let us know how you like the format!
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------ Topics Covered:
0:00 Intro Opening Shot: https://twitter.com/RyanSAdams/status/1556743328774995971?s=20&t=OzfqFxxolrjhwZICo4KV6w Ripple Effects: https://twitter.com/collins_belton/thread/1556650759994970113 Neutral Tool: https://twitter.com/jerrybrito/status/1556667240711438337?s=20&t=avKH9mQ1_3KDno2P2THs7Q
4:00 What is OFAC? Overview: https://home.treasury.gov/policy-issues/office-of-foreign-assets-control-sanctions-programs-and-information Press Release: https://home.treasury.gov/news/press-releases/jy0916 Sec Blinken: https://twitter.com/SecBlinken/status/1556677862345801728?s=20&t=QwqpNxU9CYKPz8LhBATSFQ
7:44 What is Tornado Cash? Breakdown: https://blog.chainalysis.com/wp-content/uploads/2022/08/tornado-pie-1536x1034.png Treasury Misleading: https://twitter.com/USTreasury/status/1556655337431785472?s=20&t=Jw5y0Xr4fHSelCzfhWvYlQ Alex Svanevik: https://twitter.com/ASvanevik/status/1556983834809614337?s=20&t=OCDr5P9jRweG9RVYdmmxKQ
10:20 Using Tornado Cash Neeraj Meme: https://twitter.com/NeerajKA/status/1556707552251060225?s=20&t=UNffL4gM4hBsaXDEZ0gJ_w Clean ETH2 Addresses: https://twitter.com/econoar/status/1556775153153048582?s=20&t=63-Nwh2Lv7u8tTC4E-CVUw More Use Cases: https://twitter.com/RezaJafery/status/1556751888896258049?s=20&t=9rJ2buSh4PCTPMlNKezAyw
12:15 Banning Smart Contracts Coin Center Announcement: https://www.coincenter.org/u-s-treasury-sanction-of-privacy-tools-places-sweeping-restrictions-on-all-americans/
17:08 Ripple Effects Circle: https://www.theblock.co/post/162172/circle-freezes-usdc-funds-in-tornado-cashs-us-treasury-sanctioned-wallets Github: https://twitter.com/bantg/status/1556721709931175937?s=20&t=LSCI_12-Giipv727Y52qUg Infura & Alchemy: https://twitter.com/0xdev0/status/1556933551073153024
20:55 A Ban on Who? Cobie & Gainzy: https://twitter.com/cobie/status/1556647650212155394?s=20&t=F8nhR0zX4PkbGGOl1JmBCQ Depositing .1 ETH: https://twitter.com/josephdelong/status/1557011056572129280?s=20&t=F1JszlO7Zm0lm4EGsgBrNg
23:14 A Chilling Effect Attacking Free Speech: https://twitter.com/matthew_d_green/status/1556764387796340736?s=20&t=w8K19sEWj_AVS372HOjHTw
25:47 Decentralization Priorities: https://twitter.com/econoar/status/1556825245381578753?s=20&t=63-Nwh2Lv7u8tTC4E-CVUw
----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research.
Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures
How the Greatest Decentralizing Force for Crypto Projects Is the SEC - Ep.278
How does the SEC determine if a token is a security? Why is DeFi particularly hard to regulate? What will regulators do about stablecoins? On Unchained, Greg Xethalis, chief compliance officer at Multicoin Capital, and Collins Belton, founding partner at Brookwood P.C., dive into crypto regulation, discussing securities laws, DeFi regulation, and why the US should be promoting stablecoins rather than trying to shut them down. Highlights:
why the SEC and CFTC have not announced bigger crypto enforcement news at the end of their fiscal years
why the SEC is going after DINO (decentralized in name only) companies
what the Howey and Reves tests areand how the SEC uses themto determine whether an asset is a security or not
why Collins and Greg think the SEC has recently begun been applying Reves more often
why they think centralized crypto lending products should not be considered securities under the Howey test
whether new legislation needs to be written for cryptocurrency-based products
what makes Collins think the SEC is being “disingenuous” regarding the SEC registration process for crypto companies, like Coinbase
how regulators will end up handling DeFi and why both Greg and Collins are long-term optimistic
how the US government has a “great history” of respecting privacy and encryption
why regulatory pressure is likely to build up around centralized crypto exchanges and what we can learn from the EtherDelta case
why Collins thinks most cryptocurrency companies should be regulated
why the SEC is the best motivator for forcing protocols to fully decentralize
how smart contracts could theoretically be used to standardize SEC Commissioner Hester Peirce’s Safe Harbor proposal
how blockchain data makes cryptocurrency companies more transparent and easier to regulate than centralized entities
what Collins and Greg think will happen with stablecoin regulation going forward
why the US should be pushing to make dollar-pegged stablecoins more prominent
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Episode Links
Greg Xethalis
Twitter: https://twitter.com/xethalis
LinkedIn: https://www.linkedin.com/in/xethalis/
Collins Belton
Twitter: https://twitter.com/collins_belton
LinkedIn: https://www.linkedin.com/in/collins-belton-10226283/
Cases Mentioned
SEC charged DeFi Money Market
https://www.coindesk.com/markets/2021/08/06/sec-charges-so-called-defi-company-for-allegedly-fraudulent-30m-offering/
SEC charged EtherDelta
https://www.coindesk.com/markets/2018/11/08/sec-charges-etherdelta-founder-over-unregistered-securities-exchange/
Howey Test and Reves Test
https://securities-law-blog.com/2014/11/25/what-is-a-security-the-howey-test-and-reves-test/
https://skrypto.sewkis.com/howeys-cousin-reves-may-be-another-way-for-the-sec-to-argue-that-tokens-are-securities
https://www.creditslips.org/creditslips/2021/09/coinbase-and-the-sec-.html
DINO
https://twitter.com/hesterpeirce/status/1423637816492318722?lang=en
-uniswap-labs-investigation-could-signal-a-new-era-of-enforcement
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