SEC Charges Mango Markets and Blockworks Foundation
The Securities and Exchange Commission (SEC) recently charged Mango DAO and Blockworks Foundation with the unregistered sale of ‘MNGO’ tokens and unregistered broker activity related to the Mango Markets platform. These charges stem from allegations that Mango DAO, a decentralized autonomous organization, and Blockworks Foundation, a Panama-based entity, raised over $70 million from the sale of MNGO tokens starting in August 2021. The SEC accused these entities of circumventing investor protections by sidestepping federal registration rules.
Settlement and Commitment to Destroy Tokens
In response to the charges brought forth by the SEC, Mango DAO, Blockworks Foundation, and other involved parties settled the allegations. As part of the settlement, all charged parties agreed to destroy their MNGO tokens and pay a fine. The MNGO tokens, which served as governance tokens, allowed holders to participate in the decision-making process of Mango Markets, a crypto trading platform where users can trade digital assets.
Regulatory Scrutiny and Compliance Efforts
Mango Markets recently allocated $250,000 in USD Coin (USDC) to address U.S. regulatory scrutiny following a string of regulatory challenges, including the 2022 Avraham Eisenberg hack that resulted in $116 million in losses. Crypto lawyer Bill Hughes pointed out that Eisenberg’s hack and subsequent conviction drew increased scrutiny to the entire Mango Markets project, ultimately leading to settled SEC charges and a monetary fine.
According to Bill Hughes, the Mango token initial coin offering (ICO) did not require proof of non-U.S. citizenship, leading to the participation of U.S. individuals. U.S. persons were also involved in the creation of Mango Markets and received token allocations as compensation for their contributions. The Mango DAO website was accessible to U.S. individuals, and Mango Markets was actively used by U.S. users.
Unregistered Broker Activity
In addition to the unregistered sale of MNGO tokens, the SEC also charged Blockworks Foundation and Mango Labs LLC with acting as unregistered brokers. The allegations stated that these entities recruited users to engage in trading on Mango Markets while providing advice and valuations on investment opportunities. This unregistered broker activity led to accusations of operating without the necessary regulatory registrations.
Similarly, on September 18, the SEC charged Rari Capital and its co-founders for acting as unregistered brokers. They were accused of conducting unregistered securities offerings through investment products holding over $1 billion in crypto assets. The SEC mandates that entities offering securities, such as stocks or tokens with investment features, register with them to ensure investor protections through strict disclosure rules and other regulations.
Resolution and Penalties
Mango DAO, Blockworks Foundation, and Mango Labs opted to settle the SEC charges without admitting or denying the allegations. As part of the settlement agreement, all parties agreed to pay nearly $700,000 in penalties, destroy their MNGO tokens, and request the removal of these tokens from trading platforms. Furthermore, they committed not to solicit trading of MNGO tokens in the future.
In conclusion, the SEC’s actions against Mango Markets, Blockworks Foundation, and related entities underscore the importance of regulatory compliance in the cryptocurrency and blockchain space. By settling the charges and committing to destroy the MNGO tokens, these entities are taking steps towards rectifying their past regulatory infractions and ensuring a more compliant operation in the future.
