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Mango Markets has introduced a proposal to pay $223,228 in penalties to the SEC and shut down operations involving its MNGO token.
Mango Markets, once a major decentralized exchange (DEX) on the Solana blockchain, is attempting to resolve allegations of securities law violations with the US Securities and Exchange Commission (SEC). The exchange’s governing body, Mango DAO, has introduced a proposal to pay $223,228 in penalties and shut down operations involving its MNGO token.
This settlement proposal follows a major setback in October 2022 when Mango Markets was exploited for $110 million by trader Avraham Eisenberg. Eisenberg was later charged with fraud and market manipulation.
The proposal reveals that Mango Markets has been under investigation by several US regulators, including the Department of Justice (DOJ), the SEC, and the Commodity Futures Trading Commission (CFTC), particularly regarding Eisenberg’s involvement and the protocol’s operations.
SEC Allegations and Proposed Penalties
The SEC’s allegations include violations of Sections 5(a) and 5(c) of the Securities Act of 1933, which deal with the unregistered sale of securities. Furthermore, Mango Labs, the team behind the protocol, and Blockworks Foundation, an affiliated entity, are accused of operating as unlicensed brokers, violating Section 15(a) of the Securities Exchange Act of 1934. Of note, Blockworks Foundation is not connected to the media company of the same name.
As part of the proposed settlement, Mango DAO would pay the civil penalty from its treasury, which currently holds approximately $2 million in USDC and other assets. The settlement also mandates the immediate cessation of any MNGO token transactions within the U.S. and requires the DAO to destroy or render inaccessible any remaining MNGO tokens within ten days of the final judgment. In addition , the DAO must seek the removal of MNGO tokens from all trading platforms where they are currently listed.
Potential Impact on Mango Markets’ Operations
This proposal could significantly affect Mango Markets’ future, as the MNGO token is essential for the protocol’s governance and decision-making. The removal of MNGO tokens could disrupt the DAO’s ability to function effectively. Despite these challenges, the DAO stresses the need to maintain a balance between transparency and legal confidentiality, especially since the SEC’s investigation is ongoing and confidential by law.
Mango Markets drew attention in 2021 by raising $70 million through the sale of MNGO tokens in a public offering that excluded U.S. participants. The outcome of this case could set a precedent for how other DeFi protocols interact with regulatory authorities moving forward.
As of now, the MNGO token is trading at $0.015, with an average daily trading volume of $141,000, according to CoinGecko. While the SEC has not yet responded to the settlement proposal, the DAO’s internal vote is largely in favor of the agreement. The resolution of this case could have wide-reaching consequences for Mango Markets and similar DeFi projects as they navigate regulatory challenges.
