Mango Markets to Destroy MNGO Tokens in Landmark SEC Settlement

In a groundbreaking settlement with the SEC, Mango DAO, Mango Labs, and Blockworks Foundation will eliminate their MNGO tokens and halt trading.

Mango Markets, a decentralized finance (DeFi) platform, has agreed to a settlement with the U.S. Securities and Exchange Commission (SEC) that will result in the destruction of its MNGO governance tokens. This settlement addresses charges that the token was an unregistered security, and it marks a significant moment in the ongoing regulatory crackdown on the crypto industry.

The settlement, announced by the SEC on Friday, involves Mango DAO, Mango Labs LLC, and Blockworks Foundation. As part of the agreement, the entities will not only destroy the MNGO tokens but also request that all crypto exchanges cease trading them. In addition, the organizations have agreed to pay $700,000 as part of the settlement. The court must still approve this resolution.

The charges stem from allegations that the MNGO token, which launched in August 2021 and raised $70 million, was sold as an unregistered security. The SEC also claimed that Mango DAO and Blockworks Foundation provided unregistered brokerage services. The settlement follows a vote by Mango DAO members, who, through the MNGO governance token, held an open discussion on whether to accept the SEC’s proposal. The DAO also voted unanimously earlier this week on a settlement with the Commodity Futures Trading Commission (CFTC).

In a statement, SEC Acting Crypto and Cyber Unit Chief Jorge Tenreiro emphasized that decentralized autonomous organizations (DAOs) are not immune to securities regulations. "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," he said. Tenreiro also underscored that using automated or open-source software does not exempt entities from compliance with securities laws.

The future of Mango Markets remains uncertain without the MNGO token, which was central to the project’s governance. As Mango DAO members used the token to vote on proposals, its destruction may leave the organization in a governance limbo. Whether the platform can recover from this settlement remains to be seen.

Mango Markets has faced significant challenges since it was exploited in 2022 by Avraham Eisenberg, who drained over $110 million worth of tokens from the exchange. Although Mango Markets attempted to relaunch its decentralized trading platform, the project has struggled to regain momentum. Eisenberg was convicted of fraud and market manipulation tied to his attack on Mango earlier this year, though his sentencing has been delayed until December 12.

While Mango Markets’ case may be settling in court, the implications of the SEC’s actions ripple far beyond this single project. The enforcement of securities regulations in the crypto space is becoming more aggressive, and DAOs are increasingly in the crosshairs of U.S. regulators. As the SEC continues to scrutinize unregistered securities and crypto intermediaries, this settlement may set a precedent for similar cases in the future.

photo source / Blockonome