MNGO Tokens to Be Destroyed as Mango Markets Reaches $700K Settlement with SEC

Mango DAO, Mango Labs, and Blockworks Foundation confirmed they would settle allegations with the U.S. Securities and Exchange Commission on Friday.

The U.S. Securities and Exchange Commission (SEC) settled charges with Mango DAO, Mango Labs LLC, and Blockworks Foundation. They were accused of offering the MNGO token as an unregistered security and providing illegal brokerage services.

The firms will destroy their MNGO tokens and pay $700,000 as part of the agreement. The settlement was made without any parties admitting or denying guilt and remains subject to court approval, the SEC revealed in a press release on Friday.

In addition, the SEC asked cryptocurrency exchanges to stop trading MNGO tokens. The settlement was made roughly a month after Mango DAO conducted a public vote to decide on accepting the offer. Earlier this week, the DAO voted unanimously to approve a settlement deal with the Commodity Futures Trading Commission (CFTC).

$70M Token Sale Sparked Lawsuit Against Mango DAO

According to the SEC lawsuit, the Blockworks Foundation and Mango DAO purportedly violated the Securities Act of 1933 in August 2021 when they raised more than $70 million by selling MNGO governance tokens to investors, including U.S. persons.

Mango Labs was also included in the SEC lawsuit as an unregistered broker. The SEC alleges that the company violated the Securities Exchange Act of 1934 by soliciting customers for the Mango platform and offering financial advice. The SEC’s acting chief of the Crypto Assets and Cyber Unit Jorge Tenreiro issued the following statement along with the complaint:

“Since the inception of our crypto enforcement program, our view has been that the label ‘DAO’ does not change the reality of who is behind a project, what activities they engage in, or whether their activities need to be registered. Nor does engaging in intermediation of securities with the aid of automated or open source software change the nature of such activities,” Tenreiro said.

Mango Markets attempted to relaunch the decentralized trading platform last year after struggling to recover since Avraham Eisenberg drained around $110 million in tokens from the exchange in 2022. Following the Mango Markets exploit, US regulators (DOJ, SEC, and CFTC) conducted investigations on Eisenberg’s role in the exploit. In addition to these efforts, other regulators have conducted their investigations against Mango Markets. 

Eisenberg was found guilty of market manipulation and fraud linked to his conduct regarding Mango earlier this year. However, his sentence date has been extended until December 12.

Bill Hughes, a cryptocurrency lawyer, stated on X that Eisenberg’s Mango Markets fraud and subsequent conviction increased scrutiny of the entire enterprise, eventually leading to settled SEC charges and monetary fines.

Mango DAO Voted for Settlement With SEC

On August 19, 2024, the Mango DAO launched a community vote on the proposal of a $223,228 settlement with SEC and destroying the MNGO tokens, which was approved after two days of voting. The organization also agreed to cease all sale and resale offerings of MNGO tokens in the U.S., destroy all the tokens in its possession, and be delisted from all exchanges.

The proposal intended to avoid legal actions and address SEC complaints without admitting misconduct. However, it has yet to be approved by the securities regulator.

Additionally, in September 2024, Mango Markets sought a $500,000 settlement with the Commodity Futures Trading Commission (CFTC) to conclude the inquiry into the platform. According to the proposal and additional statements on Mango Markets’ Discord server, the decentralized exchange (DEX) faced charges for allegedly not being registered as a commodities exchange, illegally providing services to US customers, and failing to implement adequate Know Your Customer measures.