Mango Markets Proposes Settlement with SEC Amid Allegations of Securities Law Violations

Mango Markets, a decentralized crypto exchange on the Solana network, is getting ready to settle with the U.S. Securities and Exchange Commission (SEC). This comes after allegations of several securities law violations.

The group that runs Mango Markets, known as Mango DAO, has started a vote on a proposal for a settlement with the SEC. This proposal includes paying hefty fines, selling off its MNGO token holdings, and looking to get delisted from other trading platforms.

As of now, the SEC hasn’t accepted the proposal. But if the vote passes—and it looks like it will—the future of Mango Markets could be quite uncertain.

It’s unclear how day-to-day operations would continue if the MNGO governance token becomes ineffective. This token is crucial for voting on everything from token listings to debt repayments and even SEC settlements.

Mango Markets has faced significant challenges since trader Avraham Eisenberg executed a "highly profitable trading strategy" that drained the protocol of $110 million back in October 2022. This incident led to Eisenberg's criminal trial for fraud and manipulation in decentralized finance (DeFi).

Reports indicated that Mango Markets was under a "regulatory inquiry" before the trial. The proposal released on Monday reveals some details about that inquiry. Alongside the SEC, Mango Markets is also being investigated by the Department of Justice and the Commodity Futures Trading Commission.

For now, the proposed settlement only addresses the SEC’s investigation. The proposal states that Mango DAO is accused of selling an unregistered security. Meanwhile, Mango Labs, the developer behind Mango Markets, is facing charges of acting as an unlicensed broker. A related organization, Blockworks Foundation, is also dealing with similar regulatory issues.

The proposed settlement would have Mango DAO neither admit nor deny wrongdoing. They’re looking at a fine of $223,228. Currently, the DAO’s treasury holds nearly $2 million in USDC and other assets, though their immediate value is still unclear.

The SEC has not commented on the situation.

During the summer bull run of 2021, Mango Markets made headlines by selling $70 million worth of MNGO tokens to the public. At that time, reports noted that the sale was closed to U.S. investors. This was likely a move to avoid regulatory scrutiny that can complicate similar projects down the line.