Inside US’s first-ever convicted case of crypto market manipulation

Today, a New York federal jury made a big decision. They found Avraham Eisenberg guilty in a huge $110 million scam. This was a first for the Department of Justice. A case of cryptocurrency market manipulation. Eisenberg, just 28 and from San Juan, Puerto Rico, now faces up to 20 years in prison for his actions.

Eisenberg was accused of grabbing about $110 million in cryptocurrency from Mango Markets and its users. He did this by jacking up the price of futures contracts and the MNGO crypto token way above their actual value. After pumping the prices, he borrowed heaps of cryptocurrency against these bloated prices.

Swindle on a Grand Scale

Prosecutors were clear. “When Eisenberg borrowed and withdrew this cryptocurrency, he had no intention of repaying the borrowed funds but rather intended to steal those funds,” said the Manhattan U.S. Attorney’s Office after indicting him in February 2023. Damian Williams, U.S. Attorney, said right after the verdict, “Moments ago, Avraham Eisenberg was found guilty by a unanimous jury in the first-ever cryptocurrency market manipulation case.”

Williams also noted, “This ground-breaking prosecution shows our office’s knack for using new methods and top-notch law enforcement tools to keep all financial markets safe.” Eisenberg’s day in court for sentencing is set for July 29, back in Manhattan.

The IRS is gearing up for more action as tax season ends. They’re seeing more crypto-related tax crimes than ever. Guy Ficco, who runs the IRS’s criminal investigative division, expects more cases of Title 26 crypto violations soon.

IRS Ramps Up Crypto Tax Enforcement

For years, the IRS has kept an eye on crypto as part of bigger investigations into frauds, schemes, and money laundering. Ficco has called out a surge in “pure crypto tax crimes,” which directly break federal income tax laws through hiding earnings from crypto sales or the origins of crypto assets.

With the help of companies like Chainalysis, the IRS can now dive deep into complex crypto transactions. This helps them find and go after tax dodgers more effectively. Chainalysis and other tech give IRS agents the ability to trace money flows and find out who really owns cryptocurrency assets.

This partnership has led to big busts, marking some of the largest seizures of illegal assets in U.S. history. As digital assets become a bigger part of our financial world, the IRS is making sure everyone pays their fair share of taxes.

Come April 15, when Americans file their taxes, the IRS will be ready to tackle an expected rise in cyber tax crimes. This shows just how important cryptoassets have become in the financial industry, and the IRS is dead set on making sure people keep things honest in the crypto market.

With these developments, it’s clear that both the legal outcomes of cases like Eisenberg’s and the ongoing efforts of agencies like the IRS are shaping how the U.S. handles the challenges and opportunities of the cryptocurrency world. The crackdown on crypto crimes, both in trading and in tax evasion, is just heating up.