Avraham Eisenberg – a “highly profitable trading strategy”
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In normal financial markets, although there are regulations (eg the EU market abuse regulations[1] and the SEC's equivalents[2]), a lot of the important details are market-specific and quite contextual, and these get filled out by legal cases around enforcement actions so market participants know where the lines are. For example, while everyone agrees more or less what frontrunning is, what constitutes quote stuffing and orderbook spoofing definitely vary by market and include some distinctions that seem arbitrary (eg in equities if you quote on multiple exchanges and then cancel all the orders when you get filled on one exchange that's fine, but if you quote on one exchanges at multiple price levels in a way where you never intend to get filled and cancel them when your touch order gets filled you're probably guilty of spoofing).
So what constitutes normal market practise and what crosses the line into market manipulation can be very unclear if it hasn't actually been defined in a legal case. If this mango markets trade had been done on a regulated commodities exchange for example I believe it would almost certainly have been considered an illegal market corner and therefore market abuse. You can't just long silver futures and then buy up all the physical silver to squeeze everyone. However it might be argued to be normal market practise (at least at the moment) in cryptos.
When people say "code is law" that's obviously untrue on its face because the law is very much the law and code is just code, but what they're really trying to say is "normal market practise is that anything permitted by the code is ok". Or how it's been expressed to me by someone who used to do crypto algo trading like this "if it's on chain, it's fair game". Whether courts and regulators see it the same way is still tbd.
[1] https://ec.europa.eu/info/law/market-abuse-regulation-eu-no-... [2] https://www.sec.gov/files/Market%20Manipulations%20and%20Cas...