SEC Settles Charges Against Mango DAO and Blockworks Foundation Over Unregistered MNGO Token Sales

Highlights:

• The SEC settled charges against Mango DAO and Blockworks for unregistered MNGO token sales.
• Both entities raised over $70 million without complying with federal securities laws.
• Mango DAO and Blockworks will pay $700,000 in penalties and destroy their MNGO tokens.

On Sept. 27, the United States Securities and Exchange Commission (SEC) settled charges against Mango Decentralized Autonomous Organization (DAO) and Blockworks Foundation, a Panama-based entity. The SEC claims that both entities raised more than $70 million from unregistered sales of MNGO tokens since August 2021. 

Marketed as governance tokens, these tokens were sold to hundreds of investors, including those in the U.S., without complying with federal securities laws. These governance tokens enable holders to influence the operation of Mango Markets, a cryptocurrency trading platform that allows users to trade digital assets.

MANGO MARKETS TO DESTROY MNGO TOKENS IN SEC SETTLEMENT

– As part of an SEC settlement, Mango DAO, Mango Labs, and Blockworks Foundation will destroy MNGO tokens and request exchanges to halt trading them.

– The entities of Mango DAO and Blockworks Foundation will pay a total of… https://t.co/ApFeUFYIGO pic.twitter.com/1tyBILd5IW

— BSCN (@BSCNews) September 27, 2024

The SEC also identified Mango Labs as an alleged unregistered broker. The SEC asserts that the firm violated the Securities Exchange Act of 1934 by reportedly soliciting users for the Mango platform and offering financial advice. Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets and Cyber Unit, emphasized that calling a project a DAO or using automated software does not exempt it from securities regulations.

Tenreiro stated:

“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.”

Crypto lawyer Bill Hughes suggested on X that Eisenberg’s hack of Mango Markets and his subsequent conviction increased scrutiny on the entire project, ultimately leading to settled SEC charges and a monetary fine.

Mango token ICO didn't require proof you weren't a US person, so US persons participated. US persons also helped create Mango Markets and got a token allocation as compensation for their work. The Mango DAO website was accessible by US persons. Mango Markets was accessed by US…

— Bill Hughes : wchughes.eth 🦊 (@BillHughesDC) September 27, 2024

Settlement Terms for Mango DAO and Blockworks

As part of the settlement, Mango DAO and the Blockworks Foundation agreed to pay a total of $700,000 in civil penalties, destroy their MNGO tokens, and request that crypto exchanges delist the tokens. Furthermore, both entities will stop marketing the tokens in the future. The settlement does not require either party to admit or deny the SEC’s claims and awaits court approval.

The SEC’s Crypto Assets and Cyber Unit conducted the investigation, while the Chicago Regional Office managed the litigation. The SEC maintains that entities involved in securities activities must adhere to registration protocols, regardless of their structure or technology.

SEC Chair Advocates for Safer Crypto Environment Amid Political Dynamics

In a recent interview on CNBC, SEC Chair Gary Gensler stated that the agency’s numerous lawsuits against major industry players aim to create a safer environment for investors. The SEC Chair has previously stated that almost all cryptocurrencies, except Bitcoin, are unregistered crypto asset securities. Earlier this year, the agency reluctantly approved spot Ethereum ETFs, indicating that they do not classify Ethereum as a security.

Crypto investors are optimistic that the next U.S. presidential term will result in more favorable policies for the crypto industry, as the Biden administration has strongly supported the SEC’s aggressive anti-crypto approach

Republican presidential nominee Donald Trump has strongly supported crypto in 2024, endorsing Bitcoin and promoting a DeFi project called World Liberty Financial, created by a group including his sons. In contrast, sitting Vice President and Democratic presidential nominee Kamala Harris has largely remained silent on crypto, only expressing a desire to foster innovation in the sector.