Empire Newsletter: Decision time in Mango Markets trial

Decision time in Mango trial

Closing arguments in Avraham “Avi” Eisenberg’s criminal fraud trial wrapped yesterday. The jury was given the case around 3:30 pm ET and called it a night after an hour of deliberations. They will resume this morning and a verdict is expected this afternoon.

Prosecutors say the 28-year-old crypto trader illegally manipulated markets when he made off with $110 million in October 2022 following a series of trades on DeFi trading platform Mango Markets. Eisenberg has been charged with commodities fraud, commodities manipulation and wire fraud.

“The more he pumped, the more he could steal,” government attorneys said Wednesday during their closing arguments. “It is clear as day the defendant knew” he was committing crimes, the prosecution added.

His defense team said this week that it’s all a big misunderstanding. Eisenberg just made some good trades. Plus, he had $13 million on the line.

Eisenberg was arrested in Puerto Rico in December 2022. Prosecutors say he manipulated Mango Market futures contracts and pumped the price of swaps by 1,300%. He then borrowed against the contracts and boarded a flight from Puerto Rico to Israel.

The defense denies none of this; they just claim that it was all legal. It’s not Eisenberg’s fault he wasn’t required to submit personal information or that Mango didn’t run a credit check. That’s just how these wild crypto markets work, they said.

The government says he was fleeing because he committed a crime — his internet search history in the days and before and after the trades shows he was researching “fraud” and “statute of limitations on market manipulation” — but Eisenberg’s defense team claims he was running after receiving numerous threats following his trades.

Plus, defense attorney Brian Klein said yesterday, Eisenberg wouldn’t have continued to search these terms if he’d actually thought he did something wrong. I’d beg to differ, but maybe the jury feels differently.

“None of us want to be judged on our web searches,” Klein said. “None of us.”

Presiding Judge Arun Subramanian, one of the newer judges at SDNY — appointed in 2023 — is tasked with overseeing the landmark case. It’s the first time ever the question of whether someone manipulated crypto markets will be posed to a US jury.

There’s no question that lax KYC rules aided Eisenberg in his trades. He executed some under the identity of a Ukrainian woman after buying her login information, the government says.

Also, before you get too excited about those “commodity” charges, the Department of Justice isn’t actually claiming MNGO is a commodity; they avoided classifying the token altogether. The DOJ did say that USDC is a commodity and the “perpetuals” in question are “swaps” to justify the charges, though.

The SEC’s case against Eisenberg, which is on hold until these criminal proceedings wrap, specifically calls MNGO a “crypto asset security” given its status as an “investment contract.”

The semantics around classification, at this point, are the least of Eisenberg’s worries, but it is something to watch out for if the SEC case proceeds. (If Eisenberg is found guilty of criminal charges, the civil suits might get dropped.)

Keep an eye on Crypto Twitter today. The jury was instructed to resume deliberations promptly at 9 am this morning. They’ve also been told they can work through lunch.

Subramanian, unlike Lewis Kaplan who oversaw SBF’s criminal trial, allows cell phones in the courtroom, so news when the verdict drops will travel fast.

— Casey Wagner

Data Center

Mango Markets has 94,000 SOL ($12.7 million) staked in the app, most of it added months after the Eisenberg incident.
Growth in ETH supply staked has slowed considerably since March, sitting around 26%.
Ethena’s USDe supply has topped out at $2.37 billion for now, after rocketing from $200 million to $2 billion in two months.
Farcaster daily users are holding strong at more than 40,000, down only around 15% since record highs.
Mantle’s on-chain treasury (excluding own tokens) is now almost as big as the Ethereum Foundation’s: $870 million to $933 million.

Rocky path ahead?

As someone who started her career reporting on Wall Street, I’m particularly intrigued by the upcoming halving.

Not just because it’s my first time getting to cover it through a crypto lens and not looking from the outside in, but also because of the way Wall Street and institutions are now interacting with crypto, specifically bitcoin.

With that said, let’s talk about the publicly traded miners. Mining as a whole is going to be vulnerable post-halving for obvious reasons, but we’ve previously reported that Wall Street analysts think that the publicly traded group could benefit from the quadrennial event.

However, we’re just days out, and there’s a lot of red when looking at the miners as a group. Marathon’s down nearly 17% in the past five days, Riot’s shed 18%, Hut 8’s down 8%, though CleanSpark’s only down 3%.

In total, the aggregate market cap dropped 28% as of April 15, according to data from JPMorgan. The market cap now sits at around $14.2 billion.

For some analysts on Wall Street, the question is simple: Is this a buying opportunity? For Bernstein analysts, it’s an opportunity to buy stocks such as Riot and CleanSpark.

As we’ve reported previously, it’s hard to know what’s going to happen post-halving for two reasons. First, this is only the fourth such event in Bitcoin’s history, so we don’t have a lot of historical data to use. Second, this is a totally different environment for Bitcoin than we’ve seen in the past.

Historically, yes, bitcoin’s gone on to carve out new all-time highs in the months post-halving, and there’s no reason to think it couldn’t hit six figures by the end of the year. Immediately after the event, bitcoin could undergo pressure dropping to the mid-$50,000 or even around $40,000.

And stocks of the bitcoin miners — despite their preparation — could also face headwinds.

— Katherine Ross

Putting the Fi in GameFi

The metaverse may go the way of the enterprise blockchain — a forgotten fad — but GameFi is at least getting another run.

GameFi is a catch-all term for games with some sort of crypto or blockchain integration, through which players can collect and trade NFTs tied to in-game assets, including heroes and items.

While not the first, Vietnamese studio Sky Mavis largely popularized the NFT format with Axie Infinity. The game’s smart contracts are still some of the most active in the space.

Business and farming simulators, card battle games and tower defense apps are also common across the major gaming ecosystems with their own layer-1s: Sky Mavis’ Ronin and Gala Games’ Gala Smart Chain, as well as Merit Circle’s Avalanche subnet BEAM.

Ronin, however, is gathering its own on-chain economy. The network seems to have largely rebounded since the debilitating $625 million raid on its token bridge in early 2022. North Korea-linked hackers stole digital assets backing bridged tokens on Ronin, undermining in-game economies — particularly Axie Infinity’s — with the incident going unnoticed for six days.

Sky Mavis later moved to make users whole. At the time of the heist, monthly active addresses on Ronin had already fallen to 2.9 million from a peak of 5.9 million in peak bull market, in November 2021. Active addresses would drop another 65% over the next three months, and by last October, Ronin was seeing only 100,000 monthly active addresses.

Now, there’s 3.2 million, per Token Terminal, and while it’s difficult to say how many represent unique individuals, it’s hard to argue with that growth. The number of transactions on the network hit 51.4 million last month, its highest point since the top of the last bull market.

Axie-related smart contracts are still driving much of the activity, but there are now five other games interacting with Ronin, including Pixels, and eventually a card battle game set in the popular Ragnarok universe. There’s also an NFT marketplace (Mavis Market) native to the network, and a budding decentralized exchange (Katana) is seeing anywhere from $60 million volume to $4 million per day this year.

You wouldn’t think so, but Ronin is currently the ninth on monthly active user leaderboards, only just behind Uniswap and Base and ahead of TON, Optimism and Aptos.

— David Canellis

The Works

WorldCoin plans to launch its own layer-2, dubbed World Chain, this summer.
Ivy League college students are dropping out to launch their crypto careers, Bloomberg reports.
This halving could be the least dramatic one yet, according to on-chain activity.
TSMC expects a Q2 sales bump thanks to major demand for AI chips, Reuters reports.
Binance received a full crypto license from Dubai after former CEO Changpeng Zhao forfeited voting control, Bloomberg reports.

The Morning Riff

What does crypto sound like?

If Hans Zimmer’s new “theme” for Tron is any indication, it’s a three-minute soundtrack clip from a forgettable Michael Bay movie. Or some vaguely sci-fi video game intro screen. Here’s my review: meh.

It’s not Zimmer’s best work by any means — that obviously is the Interstellar score — but the song, announced yesterday by Tron’s Justin Sun, certainly achieves the goal of creating an association between crypto and an independently noteworthy source.

In this case, an Oscar-winning composer. Or at least his studio, which, according to Vanity Fair, employs dozens of so-called “Zimlings” to operate a compositional megafactory.

You gotta wonder how much TRX was shoveled into the great crypto furnace to pay for this one. One assumes Zimmer’s music-writing empire was fed dollars instead of crypto, but who knows?

Either way, I wouldn’t put this one in your Spotify inspiration playlist.

— Michael McSweeney

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