Curriculum·R401 Derivatives Foundations·about 32 min
Position mechanics
By the end of this lesson you can
- →Separate notional, margin, equity and unrealised profit, and state which one moves
- →Show why a losing position levers itself up and a winning one de-levers
- →Explain what changes when unrealised profit is treated as usable collateral
- →Choose between cross and isolated margin from the failure you are willing to accept
Senior · enrolled learners
This lesson opens with Mango Markets, 11 October 2022.
- What happened
- A trader funded two accounts on Mango Markets and used them to build a very large long position in the MNGO perpetual. He then bought MNGO on the venues feeding Mango's price oracle, driving the quoted price up sharply within minutes on a thin market. Because Mango valued open positions at the oracle mark and treated the resulting unrealised profit as account equity, the long position's paper gain became borrowing capacity. He borrowed roughly $110M of other assets against it and withdrew them, after which the MNGO price collapsed. In April 2024 a jury convicted him of commodities fraud and market manipulation. On 23 May 2025 a federal judge vacated those convictions and acquitted on a third count, holding that venue in the Southern District of New York was improper and that there was insufficient evidence of falsity, noting that Mango had no terms of service, no prohibition on manipulation and no requirement that loans be repaid.
- The decision point
- No key was stolen and no contract behaved other than as written. The protocol's rule was that a position's mark price times its size is collateral, and the trader supplied both halves of that expression. Unrealised profit is a number computed from a price. Treating it as capital available to borrow against converts a claim about a market into a claim about your balance sheet, and the two are only the same if the position can actually be closed at that price.
- Recorded loss
- $110,000,000
What you will be able to answer
- →What are the four quantities?
- →What happens to effective leverage as a position loses?
- →What does counting unrealised profit as collateral do?
- →Cross or isolated?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://www.coindesk.com/business/2025/05/24/judge-overturns-convictions-in-mango-markets-exploiters-crypto-fraud-case
- https://www.trmlabs.com/resources/blog/breaking-federal-judge-overturns-all-criminal-convictions-in-mango-markets-case-against-avraham-eisenberg
- https://www.theblock.co/post/355666/u-s-judge-overturns-fraud-convictions-of-mango-markets-exploiter-eisenberg-determining-improper-venue
- https://www.venable.com/insights/publications/2025/06/venue-fatal-in-crypto-fraud-case-an-important
Confidence medium·Volatility medium·Reviewed 2026-08-07·Owner unassigned
Contested
Widely reported details of the Mango trade, including the capital deployed, the size of the MNGO position and the multiple by which the price moved, vary across sources. Only the roughly $110M extracted and the mechanism are load bearing here and both are consistent across the record and the court filings.
The legal position is genuinely unresolved. A jury convicted in April 2024 and a judge vacated in May 2025 on venue grounds and insufficient evidence of falsity. Per P6 this lesson reports both and takes no position on whether the conduct should be criminal. It is used here as a mechanics case, not a legal one.
J302-01 owns oracle manipulation as a pricing problem and J304-01 owns it as a lending failure. This lesson owns unrealised profit as collateral. Keep the split.