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Mango Markets closed after fight with SEC
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Mango Markets recently announced its closure after being embroiled in a series of legal troubles, including a lawsuit with the SEC over the sale of unregistered securities and the exploitation of a security vulnerability that cost millions of dollars in 2022.
Mango Markets Announces Cessation
The decentralized exchange (DEX) Mango Markets, which operates on Solana, is in the process of closing.
The decision comes after Mango Markets reached an agreement with the U.S. Securities and Exchange Commission (SEC), along with the results of governance votes and lingering legal troubles from the mining of a security vulnerability in 2022.
Specifically, on January 11, Mango Markets posted a notice on its official X account, announcing the closure of the platform and recommending users to close their positions.
Earlier, governance proposals aimed at adjusting interest rates and requirements on collateral were put forward and unanimously adopted by the community. This means that lending and borrowing activities on Mango Markets will officially cease on January 13.
The lawsuit between Mango DAO and the SEC
On September 27, 2024, the SEC filed a lawsuit against Mango DAO and Blockworks Foundation alleging the sale of unregistered securities.
Specifically, the SEC alleges that Mango raised more than $70 million in August 2021 through the sale of MNGO governance tokens, in violation of the Securities Act of 1933. The SEC also accused Mango Labs of operating as an unregistered broker, in violation of the Securities Exchange Act of 1934.
To settle the lawsuit, Mango DAO agreed to pay a $700,000 civil fine, destroy all tokens MNGO held, and petition the exchanges to de-list the tokens. Jorge Tenreiro, Director of the SEC's Digital Assets and Cybersecurity Unit, asserts: “The 'DAO' trademark does not change the reality of who is behind a project.”
On August 19, 2024, the Mango DAO voted and agreed to settle with the SEC in the amount of $223,228, and to destroy the MNGO token. Then, in September 2024, another proposal to settle with the Commodity Futures Trading Commission (CFTC) in the amount of $500,000 was also approved.
Exploitation in 2022 and legal troubles
The source of the difficulties faced by Mango Markets stems from the exploitation of a security vulnerability in October 2022.
Cryptocurrency trader Avraham “Avi” Eisenberg took advantage of a flaw in Mango's protocol to withdraw more than $100 million. Despite returning $67 million after a community governance vote, Eisenberg retained $40 million and was arrested by U.S. authorities in December 2022 on charges of fraud and market manipulation.
Eisenberg is currently in custody. His trial has been postponed several times, from December 12, 2024 to February 11, 2025, and currently April 10, 2025.
Eisenberg's legal team said the reason for the delay was due to “the complexity of some of the issues involved in sentencing.” Eisenberg could face a maximum sentence of 20 years in prison and civil enforcement actions from the SEC and CFTC.
Mango Markets was founded in August 2021 by Maximilian Schneider, Britt Cyr and John Kramer. Built on the Solana blockchain, Mango Markets operates as a decentralized exchange and lending platform, offering trading and borrowing services through MNGO governance tokens.
According to data from DeFilama, at the time of writing, the total locked value on Mango Markets stands at just $6.4 million, down 96.7% from the all-time high of $210 million in November 2021.
The closure of Mango Markets is a remarkable event in the DeFi market. This incident once again highlights the legal challenges faced by DeFi projects, and shows the importance of complying with securities regulations.
