Mango Markets Proposes $500K Settlement to End CFTC Investigation

The proposed settlement is already backed by Mango DAO members, and aims to avoid further litigation. Meanwhile, US lawmakers are calling for the repeal of the SEC’s SAB 121, while Australia plans to introduce new licensing requirements for crypto exchanges.The crypto mining industry also saw some new legal developments as Riot Platforms and Bitfarms reached a settlement over its governance dispute.

Mango Markets Looks to Settle CFTC Allegations

Mango Markets, a Solana-based decentralized exchange, may soon be paying an additional $500,000 in fines to settle allegations from the Commodity Futures Trading Commission (CFTC). According to a Sept. 22 proposal from Mango Markets’ legal team to the Mango DAO, the decentralized exchange is under an “ongoing and nonpublic” investigation by the CFTC. The legal representatives proposed paying half a million dollars to settle the issue and prevent any litigation from being brought by the CFTC.

The charges involve Mango Markets allegedly failing to register as a commodities exchange, providing services illegally to US customers, and lacking sufficient Know Your Customer (KYC) measures. Due to the confidentiality of the settlement and the investigation, Mango DAO’s representatives have not publicly revealed all of the details. However, they reassured DAO members that settling the case will very likely avoid future legal action from the CFTC.

The proposal is not an admission of guilt or denial of the allegations, and is currently receiving strong support from DAO members. At press time, more than 123,000,000 votes were cast in favor of the settlement, with none opposing.

Votes for the settlement (Source: Realms)

This proposed settlement follows a previous one in August, when Mango DAO agreed to pay $670,000 to the Securities and Exchange Commission (SEC) over claims that it sold its native MNGO token as an unregistered security in 2021. That settlement was also made to stop an ongoing investigation.

Mango Markets has faced a lot of challenges since a $110 million exploit in October of 2022. Trader Avraham Eisenberg manipulated the protocol, which led to a criminal trial for fraud and market manipulation in April. The exploit started investigations into Mango Markets by the SEC, the Department of Justice (DOJ), and the CFTC, with the SEC claiming Mango DAO and associated entities violated securities regulations.

Lawmakers Call for an End to SEC’s SAB 121

Regulators do not only have their sights set on Mango Markets. More than 40 US Republicans, led by House Financial Services Committee Chair Patrick McHenry and Senator Cynthia Lummis, have called on the SEC to overturn Staff Accounting Bulletin No. 121 (SAB 121). They claim it undermines cryptocurrency custody rules and stifles financial innovation. 

In a letter sent to SEC Chair Gary Gensler on Sept. 23, the group of 42 politicians argued that the rule, which requires SEC-reporting entities holding cryptocurrencies to record those holdings as liabilities on their balance sheets, was introduced without proper consultation and deviates from established accounting standards.

Part of the Sept. 23 letter to Gensler and the SEC

The politicians also argued that SAB 121 does not account for the legal and economic obligations of custodians, which ends up putting consumers at greater risk of loss. Additionally, they criticized the SEC for bypassing the Administrative Procedure Act’s rulemaking process by issuing the bulletin under the guise of staff guidance. The letter urged the SEC to rescind SAB 121, and pointed out that doing so is within the agency’s authority.

Democratic House Representative Wiley Nickel also voiced some of his concerns that SAB 121 will prevent US banks from custodying cryptocurrency exchange-traded products at scale. This could lead to a “concentration risk” by shifting control to non-bank entities.

The politicians also raised concerns over potential inconsistencies in the application of SAB 121, and pointed out that the Bank of New York, which is the largest custodian bank in the US, reportedly received an exemption from the rule, according to a Wyoming legislature hearing on Sept. 17.

The push to repeal SAB 121 came after President Joe Biden’s veto of a repeal bill in June, despite bipartisan support in both the House and Senate. Attempts to overturn the veto failed on July 10, and fell 60 votes short of the two-thirds majority needed in the House for it to advance to the Senate. 

Many of the letter’s signatories come from the House of Financial Services and Senate Committee on Banking, Housing, and Urban Affairs, including House Representatives French Hill, Tom Emmer, and Senators Bill Hagerty and Tim Scott.

Australian Crypto Firms Face New Licensing Requirements

Meanwhile, Australia is also keeping a tight legal leash on the crypto industry. In fact, Australian regulators are preparing new guidance that will require crypto exchanges to obtain financial services licenses. The Australian Financial Review reported that the Australian Securities and Investments Commission (ASIC) believes the Corporations Act already applies to most major crypto assets, including Bitcoin (BTC) and Ethereum (ETH).

ASIC commissioner Alan Kirkland announced the upcoming changes at the AFR Crypto and Digital Assets summit in Sydney on Sept. 23. The regulator plans to update the Corporations Act’s Information Sheet 225 to clarify how specific crypto tokens and products should be regulated. Kirkland stated that many crypto-asset firms in Australia will likely need a license under current laws. 

The ASIC supports responsible innovation but is especially concerned about consumer harm and market misconduct. The new licensing requirements will try to mitigate these risks while still boosting consumer confidence and market integrity. The updated guidance will be released in the coming months, and there will be opportunities for industry feedback.

The move was announced after Senator Andrew Bragg criticized Australian regulators for falling behind in crypto regulation. At the AFR event, Bragg argued that Australia has gone from a leader to a laggard in the crypto space over the past two and a half years. 

He also criticized the current government for abandoning the 2022 regulatory framework for crypto asset secondary service providers (CASSP) and re-releasing a consultation paper with little action since. Bragg predicted that no crypto legislation will be passed during the current Parliament term, and even accused the government of stifling innovation and slowing down blockchain development.

This comes after Australia’s Committee on Economics Legislation recommended not passing Bragg’s crypto regulation bill in early September of 2024 after suggesting that more research was needed. 

Riot Platforms and Bitfarms Reach Settlement

The crypto mining industry also saw some legal developments. Bitcoin mining companies Bitfarms and Riot Platforms have reached a settlement that condudes a months-long governance dispute. 

As part of the agreement, Andrés Finkielsztain will step down from Bitfarms’ board of directors, and Amy Freedman will take his place. Riot Platforms holds a large stake in Bitfarms, and will also withdraw its proposal for further board changes ahead of the upcoming special shareholder meeting. The companies have agreed to a standstill arrangement until 2026. Riot also agreed to pursue any hostile actions, like increasing its stake or proposing more board changes.

Some of the terms of the agreement (Source: Bitfarms)

Bitfarms will expand its board from five to six members, pending shareholder approval at a meeting that is set for no later than Nov. 20, 2024. Riot has agreed to vote in favor of the board expansion and the election of an independent director.

The dispute between the two miners started in May of 2024, when Riot, who was already one of Bitfarms’ largest shareholders, proposed a $950 million buyout of the Canadian Bitcoin mining firm, Bitfarms rejected the proposal. 

In response to this, Riot increased its stake to just under 15%, which pushed Bitfarms to implement a “poison pill” defense to prevent further takeovers. Riot later acquired an 18.9% stake in Bitfarms and asked for major board changes because of concerns over governance.