MEV law after Avi Eisenberg's (partial) victory

Avraham Eisenberg—previously found guilty of wire fraud and market manipulation of Mango Markets by a jury[1]—was just acquitted on wire fraud charges.[2] Also, while the judge confirmed Eisenberg engaged in illegal market manipulation, this conviction was vacated for being brought in a wrong jurisdiction (New York instead of Puerto Rico). This decision provides us rare insight into how U.S. courts may approach MEV-related prosecutions. My co-authors and I argued in "Blockchain Transaction Ordering as Market Manipulation"[3] that applying traditional finance assumptions to crypto is a risky business and that intuitions about fairness do not automatically carry over. We also argued that certain forms of MEV—particularly sandwiching—might constitute market manipulation under existing law. Here, I comment on the nuances that the Eisenberg decision introduces for legal analysis of MEV. To be clear, I don't claim that what Eisenberg did was MEV[4], only that his case is relevant to legal analysis of MEV.

Wire fraud versus commodities fraud: a critical distinction

Judge Subramanian's analysis proceeded on two separate tracks that must be carefully distinguished:

Wire fraud: the falsity requirement

The wire fraud charge required proving that Eisenberg made material false statements or misrepresentations. The government argued he implicitly lied about intending to repay borrowed funds and misrepresented the true value of his collateral. The court rejected both theories, finding that on a platform with no rules or terms of service, there was no basis for finding implicit misrepresentations. As Judge Subramanian explained: "on a platform with no rules, instructions, or prohibitions about borrowing, the government needed more to show that Eisenberg made an implicit misrepresentation."[5]

This wire fraud analysis, while important for understanding the court's approach to DeFi platforms, operates in a different legal universe from our paper's focus. We did not analyze wire fraud liability for MEV strategies—our analysis centered on market manipulation under commodities and securities law.

Commodities fraud: manipulative devices without falsity

The commodities fraud charge tells a different story. Under CFTC Rule 180.1, prosecutors could establish liability either through material false statements or through use of a "manipulative device, scheme, or artifice to defraud."[6] Critically, the jury found Eisenberg guilty of commodities fraud specifically by concluding that he employed a "manipulative device," not that he made a false statement.

While the conviction was ultimately vacated for improper venue, the court found the evidence was sufficient to support the jury's finding on this "manipulative device" prong. The court agreed that Eisenberg's intentional manipulation of the MNGO price on external exchanges to affect the settlement price of his perpetuals was an actionable form of market manipulation under the CEA.

This distinction directly engages with our paper's core argument. We contended that, in some circumstances, MEV strategies like sandwiching or oracle manipulation might constitute "manipulative devices" or acts under CFTC Rule 180.1(a)(1) and (a)(3), even without false statements.[7] The decision in the Eisenberg case suggests courts can recognize trading strategies as manipulative without requiring explicit misrepresentations.

Why the distinction matters for MEV analysis

The court's treatment of these two charges reveals different pathways and obstacles for MEV-related prosecutions:

The higher bar for implied misrepresentations

The wire fraud acquittal suggests that courts will be reluctant to find implicit misrepresentations in DeFi contexts lacking explicit rules. This could shield MEV strategies from criminal fraud theories based on supposed violations of unwritten market norms or expectations. However, this limitation applies primarily to fraud claims requiring proof of false statements—not to manipulation claims based on artificial price effects or abuse of market structure.

The continuing viability of manipulation theories

The commodities fraud conviction (though ultimately vacated for venue reasons) demonstrates that manipulation theories remain viable even when falsity cannot be established. The court accepted that Eisenberg's scheme involved using a "manipulative device" to artificially inflate his collateral value and extract funds. This aligns with our paper's argument that in some situations some MEV strategies might constitute manipulation through their market effects, regardless of whether they involve false statements.

Platform rules: different implications for different claims

The absence of platform rules played a decisive role in the wire fraud analysis but had less impact on the manipulation charge. This suggests a nuanced relationship between platform rules and different theories of liability:

For misrepresentation-based claims

Without platform rules establishing user expectations, courts may find it nearly impossible to identify implicit misrepresentations. Judge Subramanian's citation to United States v. Connolly[8] reinforces that absent explicit prohibitions, traders cannot be held liable for conduct that merely "violated any reasonable notion of fairness."

For manipulation claims

The existence or absence of platform rules may be less determinative for manipulation claims focused on market effects rather than deception. Our paper argued that sandwiching could create artificial price effects that constitute manipulation under a "moralized" inquiry into legitimate versus illegitimate market forces.[9] The Eisenberg decision doesn't foreclose this theory, though it suggests courts will scrutinize claims about "artificial" prices in rule-free environments.

The Eisenberg case is a more direct example for future instances of oracle manipulation or covered open-market manipulation The court's deicision that Eiseberg's conduct qualifies as a "manipulative device" validates our claim that such strategies carry a high risk of legal liability.[10]

Implications

Our paper's emphasis on distinguishing between different MEV contexts—including public vs private transactions, private order flow—becomes even more important given the court's focus on specific platform characteristics and user relationships.[11]

The court's venue analysis reveals significant practical obstacles to prosecuting blockchain-based manipulation. Despite the government's efforts to establish venue through various connections to New York—including trade processing activities and the presence of affected users—the court found these insufficient. This suggests that prosecutors may face jurisdictional hurdles in bringing MEV-related cases, particularly given the global and decentralized nature of blockchain networks.

  1. U.S. Department of Justice, Man Convicted for $110M Cryptocurrency Scheme (18 April 2024). ↩︎

  2. United States v. Eisenberg, No. 23-cr-10 (S.D.N.Y. May 23, 2025). ↩︎

  3. Mikołaj Barczentewicz, Alex Sarch & Natasha Vasan, 'Blockchain Transaction Ordering as Market Manipulation' (2023) 20 Ohio State Technology Law Journal 1. ↩︎

  4. How I understand "MEV"?; Barczentewicz, Sarch & Vasan (n 2) 78. ↩︎

  5. United States v. Eisenberg, 32. ↩︎

  6. 17 C.F.R. § 180.1. ↩︎

  7. Barczentewicz, Sarch & Vasan (n 2) 52. ↩︎

  8. United States v. Connolly, 24 F.4th 821 (2d Cir. 2022). ↩︎

  9. Barczentewicz, Sarch & Vasan (n 2) 52-58. ↩︎

  10. Barczentewicz, Sarch & Vasan (n 2) 75-78. ↩︎

  11. Barczentewicz, Sarch & Vasan (n 2) 65-74. ↩︎