Curriculum·R401 Derivatives Foundations·about 33 min
Position mechanics
By the end of this lesson you can
- →Separate notional, margin, equity and unrealized profit, and state which one moves
- →Show why a losing position levers itself up and a winning one de-levers
- →Explain what changes when unrealized 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
- On 11 October 2022 Avraham Eisenberg deposited about five million USDC into two accounts on Mango Markets and used one to sell and the other to buy the same MNGO perpetual, so that he held both the long and the short side. He then bought MNGO on the three exchanges feeding Mango's price oracle, FTX, AscendEX and Serum, and the oracle price rose more than thirteen-fold within about thirty minutes on a thin market. Mango counted both digital assets and perpetual positions as collateral at the oracle price, so the long side's paper gain became borrowing capacity, and he borrowed against it. He then sold MNGO on the same exchanges, the price collapsed, and he borrowed again against the now profitable short. In total he borrowed and withdrew over $110M of other assets, by the CFTC's count. On 18 April 2024 a jury convicted him of commodities fraud, commodities manipulation and wire fraud. On 23 May 2025 the trial judge vacated the two commodities convictions because venue in the Southern District of New York had not been established, and entered a judgment of acquittal on wire fraud for insufficient evidence of falsity, finding that Mango had no terms of service, no rules on manipulation or borrowing, and no evidence that borrowing carried an obligation to repay.
- The decision point
- The lesson's reading: 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. Unrealized 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 unrealized 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://storage.courtlistener.com/recap/gov.uscourts.nysd.592131/gov.uscourts.nysd.592131.220.0.pdf
- https://storage.courtlistener.com/recap/gov.uscourts.nysd.592131/gov.uscourts.nysd.592131.223.0.pdf
- https://www.cftc.gov/PressRoom/PressReleases/8647-23
- https://support.gemini.com/hc/en-us/articles/12086958781339-Why-is-the-effective-leverage-more-than-the-set-account-limit
- https://www.coinglass.com/learn/2025-annual-report-en
- 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 2026-10-22·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. The two accounts, the roughly five million USDC, the three oracle exchanges and both borrowing legs are from the court's opinion of 23 May 2025, which puts the total at over $100M; the over $110M and the thirteen-fold oracle move within thirty minutes are from the CFTC's complaint announcement of 9 January 2023, which are allegations. Only the scale and the mechanism are load bearing here.
The legal position is unresolved. A jury convicted on three counts on 18 April 2024. On 23 May 2025 the court vacated counts one and two (commodities fraud and commodities manipulation) for improper venue, and acquitted on count three (wire fraud) for insufficient evidence of falsity; the judgment entered on 28 May 2025. The opinion notes that a venue reversal does not resolve the question of culpability, and it rejected the separate argument that the commodities-fraud evidence was insufficient. In June 2025 the government obtained an extension, to 23 July 2025, to decide whether to appeal; we have not confirmed whether an appeal was pursued or how it ended. Per P6 this lesson reports the record 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 unrealized profit as collateral. Keep the split.