Key takeaways
- Mango Markets Proposes Settlement with SEC, Including Fines and Liquidation of Tokens
- The future of Mango Markets’ operations is uncertain as governance tokens face potential obsolescence.
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Mango Markets, once one of the leading decentralized exchanges on Solana, is preparing to reach a settlement with the SEC over alleged securities law violations. The protocol’s governing body, Mango DAO, has initiated a vote on a proposed settlement that would involve paying fines and ceasing operations of its MNGO token.
The proposed settlement comes after a $110 million exploit by Avraham Eisenberg in October 2022 that severely impacted the protocol. In December of that year, Eisenberg was charged with fraud and market manipulation. According to the DAO’s proposal:
“Investigations have been conducted by US regulators (DOJ, SEC and CFTC) against Eisenberg for his role in exploiting the vulnerability. In addition to these actions, some regulators have conducted their own investigations into Mango Markets.”
The SEC alleges that the DAO violated Sections 5(a) and 5(c) of the Securities Act of 1933, while Mango Labs and Blockworks Foundation are accused of violating Section 15(a) of the Securities Exchange Act of 1934. For clarity, this name does not refer to the media organization of the same name. To resolve these allegations, the DAO is proposing a settlement offer that includes:
“The payment of a civil penalty in the amount of $223,228, to be paid by the DAO Treasury to the SEC and permanently enjoining the DAO from violating Sections 5(a) and 5(c) of the Securities Act of 1933.”
If the agreement is accepted, Mango DAO will:
“Immediately cease all offers, sales, or resales of MNGO Tokens on the Protocol by means or instrumentalities of interstate commerce in the United States; destroy or make unavailable for trade, sale, offer, or purchase all MNGO Tokens in the possession or control of the DAO within 10 days of the Final Judgment becoming effective.”
The DAO should also request the removal of MNGO tokens from all cryptocurrency exchanges where they are traded and refrain from soliciting trading platforms to allow MNGO trading.
This regulation could potentially jeopardize Mango Markets’ future operations, as the MNGO governance token is an integral part of the protocol’s decision-making processes. The proposal recognizes the need for transparency while preserving privacy, specifying:
“Because of rules regarding the confidentiality of settlement discussions and because the SEC’s investigation is ongoing and not public under the law, the DAO representative is limited in the information he is permitted to share in a non-privileged context.”
The DAO treasury currently holds nearly $2 million in USDC and various other assets. If the proposal passes and the SEC accepts the regulation, it would mark a significant step forward in the regulation of decentralized finance (DeFi) protocols.
The proposed deal reflects the increasing regulatory scrutiny facing cryptocurrency projects, even those that have tried to avoid U.S. investors. Mango Markets previously made headlines in 2021 for selling $70 million worth of MNGO tokens in a public sale that excluded U.S. participants.
At the time of writing, data from CoinGecko indicates that the MNGO token is trading at $0.015 on an average daily volume of $147,000. The outcome of this settlement could set a precedent for how other DeFi protocols will interact with securities regulators in the future.
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