Solana’s Former Top Decentralized Crypto Exchange Faces SEC Securities Violations

Mango Markets, Solana’s once-mighty decentralized crypto exchange that was gutted by convicted fraudster Avraham Eisenberg, is preparing to settle with the U.S. Securities and Exchange commission over allegations that it violated a litany of securities laws.

The governing entity that manages Mango Markets, Mango DAO, on Monday opened voting on a “SEC settlement offer proposal” that would see the group pay hundreds of thousands of dollars in fines, destroy its holdings of MNGO tokens and seek its delisting from other trading venues.

The SEC hasn’t yet accepted the proposal. But if this vote passes (it already has enough votes to sail through), and the agency does accept it, Mango Markets’ future could become highly uncertain.

It was not immediately clear how Mango Markets’ day-to-day functions would survive if the MNGO governance token that investors use to vote on everything from token listings and buybacks to debt repayments – not to mention SEC settlements – becomes obsolete.

Mango Markets has struggled to recover from opportunist trader Avraham Eisenberg’s debilitating “highly profitable trading strategy” that in October 2022 drained the protocol of $110 million and led to Eisenberg’s groundbreaking criminal fraud and manipulation trial of misdeeds in decentralized finance (DeFi).

Shortly before that trial, CoinDesk reported that Mango Markets faced a “regulatory inquiry.” The proposal aired Monday revealed some of the contours of that probe. In addition to the SEC, Mango Markets is being investigated by the Department of Justice and the Commodity and Futures Trading Commission.

Only the SEC’s investigation is at issue in Monday’s proposed settlement offer. According to the proposal, Mango DAO is facing allegations it sold an unregistered security. Mango Labs, the developer of Mango Markets, is facing charges it acted as an unlicensed broker. A related entity, Blockworks Foundation (not the media group), also is staring at similar claims from regulators.

The proposed settlement would see Mango DAO neither admit nor deny wrongdoing. It proposes paying a fine of $223,228. The DAO’s treasury currently holds nearly $2 million in USDC and a variety of other assets whose practical value was not immediately clear.

The SEC did not respond to a request for comment.

During Solana’s 2021 summer bull run, Mango Markets made headlines by selling $70 million of MNGO tokens to the public.

As CoinDesk reported at the time: “The sale was closed to U.S. investors, likely in an attempt to stave off the regulatory scrutiny that can hamstring similar projects – sometimes years down the line.”