| In
Crypto Trial of Avi Eisenberg Guilty
Verdicts Despite Code Is Law Defense July
Sentencing
By Matthew
Russell Lee, Patreon Maxwell
Book
SDNY COURTROOM,
April 17 - In the U.S.
District Court for the
Southern District of New York
on December 27, 2022 a
complaint was ordered unsealed
charging Avraham Eisenberg
with commodities fraud. He was
arrested in Puerto Rico.
Inner City Press
is covering the case(s), often
as the only media in the Mag
Court. Related
Mag Court live-tweeted
thread (more on Patreon
here)
vlog here
On January 9,
Inner City Press came across
the CFTC case against
Eisenberg, just filed (still
with no title in PACER) and
put it out on Patreon here.
More
on Substack here.
On June 14, the
judge held a proceeding to
pick a trial date. Inner City
Press covered it, thread here.
Inner City Press
covered the trial (below) and
on April 18 Avi Eisenberg was
convicted. The US Attorney's
Office announced "EISENBERG,
28, of Puerto Rico, was
convicted of commodities
fraud, which carries a maximum
penalty of 10 years in prison;
commodities manipulation,
which carries a maximum
penalty of 10 years in prison;
and wire fraud, which carries
a maximum penalty of 20 years
in prison. The statutory
maximum penalties in this case
are prescribed by Congress and
are provided here for
informational purposes only,
as any sentencing of the
defendant will be determined
by a judge. EISENBERG is
scheduled to be sentenced on
July 29, 2024."
Back on
July 27 Eisenberg moved to
dismiss and to suppress; he
submitted a 7-page affadavit
including "In the evening of
December 26, 2022, I arrived
by airplane at The Luis Munoz
Marin International Airport in
Carolina, Puerto Rico, just
outside of San Juan. 3. I
disembarked the airplane with
my luggage, a backpack and a
suitcase. 4. I walked to the
United States Customs counter.
There, I was questioned by a
United States Customs and
Border Protection ("CBP")
agent regarding the purpose of
the trip I had just completed
and general questions about
the contents of my luggage. 5.
The CBP agent directed me to a
specific area several feet
away from the Customs counter
for additional questioning,
and there another CBP officer
opened the suitcase and
backpack. I recall the agent
pulling out the laptop and
asking me to turn it on" -
full affidavit on Patreon here.
Watch this site.
The
complaint is on Patreon here
On February 3,
Eisenberg in a yellow jump
suit and feet shackled was
brought into Magistrates Court
at SDNY. He had, at least for
the proceeding, the same
lawyer Ethereum developer
Virgil Griffith had in the
North Korea sanctions case he
pled guilty in: Brian Klein.
His
parents were in the gallery
and he looked at them, from
two rows away. The prosecutor
said that (unlike on Sam
Bankman-Fried) they were
seeking detention, and that he
was consenting at least for
now. Here is Inner City
Press' thread.
There's more
detail on Patreon here.
On February 14,
there was a very brief
arraignment, thread here
On November 2,
2023 Eisenberg's counsel wrote
it seeking to push the
December 4 trial to March or
April. They said Eisenberg was
moved from Essex to the MDC,
and not allowed to bring his
discovery material with him.
The SDNY prosecutors
acknowledge that's a problem,
but want only a one-week delay
to December 11 - or to April,
citing an unrelated murder
trial.
On November 3, it
was moved to April 2024. And
on November 21, Judge Amit
Subramanian set out questions
to be answered in early
December, including "Whether
any transaction involving
USDC, even where it is used as
a medium of exchange to
purchase something that is not
a commodity, is nevertheless a
“contract of sale of any
commodity” given the statutory
and regulatory definitions
(see Dkt. 37 at 5-6);
Whether the indictment alleges
manipulation as to the price
of USDC, deceptive conduct
affecting the USDC market, or
deceptive conduct otherwise
“in connection with” a
contract of sale of USDC (see
Dkt. 37 at 7–8); Whether
the indictment alleges a
manipulative device “in
connection with . . . any
swap” where Eisenberg was the
party on both ends of the MNGO
Perpetuals" - full order and
questions on Patreon here.
On March 14,
2024, there was a hearing on
motions in limine and experts.
Inner City Press live tweeted
here
AUSA: We're
getting toward a "code is law"
inference...Question as to
terms of service, in defi, who
the duty is between... They
will be arguing Mango Markets
should have seen this coming
Eisenberg's lawyer: What he
did was not criminal.
On March 28 there
was the final pre-trial
conference, and Inner City
Press went, here:
OK - now in
criminal crypto case of US v
Avi Eisenberg, at final
pre-trial conference. He was
brought in by US Marshals
Judge: What about
they Touhy request?
Defense: The
Government only gave us their
objections yesterday... They
are trying to use our client's
tweets against him. AUSA: We
have been making nightly
disclosures of 3500 material
There was some
back and forth on logistical
issues - will Eisenberg come
forward to sidebars with the
judge? Defense: No, that would
be a circus [the Marshals
would go up with him,
highlighting that despite the
suit he is in detention].
We will continue
to cover the case.
In a parallel
civil case, on February 24,
2023 there was an hour and a
half argument in Mango Labs v.
Eisenberg before Judge Lewis
J. Liman. Inner City Press
live tweeted...
Ultimately
Judge Liman extended the TRO
for two weeks, after for two
letters by Tuesday, and said
he will rule on March 10.
On March 10,
Inner City Press was there,
thread here
On March 27, one
of Eisenberg's counsel wrote
in supporting his subpoena of
Mango Markets founders Dafydd
Durairaj and Max Schneider,
noting that Durairaj "is
expected to be a critical
government witness."
On April 8, just
before 5 pm, the 12 jurors and
3 alternates were selected.
Inner City Press was there,
observing from the gallery as
Eisenberg whispered in the ear
of one then another of his
five lawyers, going over
exhibits of text messages on
the laptop before him. Judge
Subramanian approved the
defense's request to bring
their client snacks, but
deferred judgment on a number
of exhibits.
On April 9 the
trial began in earnest. Here
were the opening arguments, thread.
On April 10, US
expert witness Jain got
grilled, amid more serious
talk of DeFi, thread.
On April 11, the
US evidence got more specific,
and moved toward endgame, thread
On
April
12, the
US
Attorney's Office closed it case
with a victim and then a
witness about Eisenberg's Google
searches about market manipulation
and Otisville
prison, thread
On April
17, the defense closing and beginning of jury
deliberation, from thread:
Eisenberg's lawyer: Ladies and gentlemen,
Avraham Eisenberg did not commit any
crimes. He engaged in a successful and
legal trading strategy. He put his own
money at risk. They talked about a con
man. But you know that's not the case
Eisenberg's lawyer: On Mango Markets, you
don't communicate with anyone. No one asks
you want you intend to do. The program
works automatically. You can trade with
yourself. My client, Avi, fully complied
with the Mango Markets smart contracts
Eisenberg's lawyer: He withdrew he
own capital. It wasn't a borrow. And the
rest of the money? He returned shortly
afterwards. They called Avi brazen -
that's not a crime. He didn't hack into
Mango Markets. The charges are fraud, 4
misrepresentations
Eisenberg's lawyer: You are allowed
to draw favorable inferences. Avi sued
Circle trying to get his funds back - that
means, he didn't believe he did anything
wrong...
Eisenberg's lawyer: Look at the lack
of terms of service on Mango Markets, and
remember the presumption of innocence. The
trading in Mango tokens, and the trading
in Mango Perpetuals, that's two entirely
different things.
Eisenberg's lawyer: My client used masked
e-mails. We don't dispute that... These
smart contracts are self-enforcing. It's
its own little rule maker. You don't have
to say your source of funds. It doesn't
care.
Eisenberg's lawyer: On Mango
Markets, you could trade with yourself all
day long. The smart contract was on
GitHub. My client looked at it.... You
can't borrow your own money, you're just
taking your profits out.
Eisenberg's lawyer: My client was in
Israel. He had control of $110 million.
But he was seeking to return the funds.
Maybe you wouldn't have done it. But this
is how people do it in this world of
cryptocurrency. He sent $67 million. What
was kept were the profits
Eisenberg's lawyer: They talk about how he
planned this all out. But why didn't he go
to Israel first? He could do it from
there. But he flew back on his own to the
same city he left from. The [Neil]
Phillips case? Totally different. He was
registered with the SEC
Eisenberg's lawyer Brian Klein: None
of us want to be judged solely our web
searches. And notice he was looking
up how to pay taxes on his crypto.... The
smart contract was permissionless. Avi's
trades fully complied with the smart
contracts
Eisenberg's lawyer: After I sit down, the
prosecutor is going to reply. That's
appropriate. They have the burden. How the
smart contract operated is highly relevant
to what was going on in my client's head.
Find him not guilty on all counts. He
should be acquitted
Judge Subramanian: I invite the jurors to
stand up and stretch, and AUSA Burnett to
go to the podium for his reply. Or Mr.
Burnett do you need some time? Yes? OK,
five minute break in the jury room. [Jury
files out]
AUSA Burnett: The defendant took a
plane out of the country. Not
because someone on the Mango Markets
Discord, but on the tarmac he was
searching criminal market manipulation
AUSA Burnett: They say, Because the system
let him do it, it's OK. That's exactly
backwards, because he had to lie, to take
the money out. Imagine there's a thief of
IDs, he types it in and drains the
account. He had to lie to access it. It's
the same thing here
AUSA Burnett: He had to inflate the value
of his assets to take money out- he had to
lie. When someone clicks "I accept the
risk" that's not signing up for
fraud. Judge Subramanian: We'll
break, then I'll instruct you on the law.
[Then, jury notes, verdict (?)
At 2:10 pm, they're back. Judge
Subramanian: Everyone ready to sit back
and listen to a long jury
instruction? [Laughter in courtroom
- Inner CIty Press will pick back up after
the (pre-written and already public) legal
instruction)
Now in courtroom, jury note has been
handed to Judge's courtroom deputy, and
the lawyers have assembled. Avi Eisenberg
at defense table.
Courtroom deputy: The judge is going
to come down to just briefly put something
on the record. [Doesn't sound like a
verdict - could just be jurors saying they
want to leave for the day]
Judge: The note says, We will continue
tomorrow. Jury entering! Judge: You are
excused for the day.
[Note: this SDNY jury is more
diverse than Trump's (so far) in 100
Centre
Watch this site.
Inner City Press
will have more on these cases.
The criminal case
is US v. Eisenberg, 23-cr-10
(Subramanian)
The stayed CFTC
case is Communities Futures
Trading Commission v.
Eisenberg, 23-cv-173
(Schofield)
The Mango Labbs
civil case is Mango Labs, LLC
v. Eisenberg, 23-cv-665
(Liman)
***
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