Based on this article, it doesn't sound like he did anything illegal (initially). He saw an opportunity and took advantage of it not unlike high frequency trading in the late 90s/early 2000s. Decentralized markets operate in a space that's inherently risky -- if they don't want to get exploited, hire better engineers or get out of the game. Begging the government for help when you got bested isn't how decentralization works.