Mango Markets, a DeFi platform based on Solana, is currently engaged in a critical negotiation with the SEC.
This negotiation follows accusations made by the SEC that the platform violated American securities laws. The case originated from a major hack in 2022, where Avraham Eisenberg managed to drain over $110 million from the protocol. This incident significantly weakened Mango Markets’ position in the DeFi ecosystem.
The settlement proposal: content and implications
Taking into account confidentiality restrictions and the need for transparency towards DAO members, the terms of the proposal establish the general framework of the proposed settlement with the SEC. A settlement with the SEC would avoid a lawsuit filed by the SEC against the DAO regarding these allegations.
In the face of regulatory pressure, Mango DAO, the platform’s governance entity, recently submitted a settlement proposal to the SEC. This proposal, titled “SEC Settlement Offer Proposal“, aims to resolve the litigation by agreeing to pay $223,228 in fines to the SEC’s treasury. Additionally, Mango DAO commits to destroying its MNGO token reserves and requesting their removal from trading platforms.
The objective of this proposal is clear: to avoid a long and costly legal battle with the SEC while resolving the allegations without admitting or denying wrongdoing. This strategic choice by Mango DAO could enable the platform to focus on its rehabilitation and future, although the agreement, if finalized, would be a blow to Mango’s image in the financial markets.
A unanimous community response and broader regulatory context
The voting process, which opened on Monday, quickly reached the required quorum with over 110 million votes cast, all in favor of the proposal. This unanimous support likely reflects the community’s desire to close this matter and avoid potential heavier sanctions or prolonged uncertainty that could further harm the platform.
It is important to note that this settlement with the SEC does not cover other ongoing investigations that Mango Markets may face. In fact, the platform is also under investigation by the Department of Justice (DoJ) and the Commodity and Futures Trading Commission (CFTC). These investigations, although separate from the SEC’s, add an additional layer of complexity to the legal and regulatory challenges Mango must face.
The legacy of the Eisenberg hack
Since the hack perpetrated by Eisenberg, Mango Markets has struggled to regain its position as a leader in decentralized finance on Solana. During his trial, Eisenberg tried to justify his actions as a legitimate and winning trading strategy, made possible by Mango’s protocol vulnerabilities. However, the court found him guilty of derivatives fraud, commodity manipulation, and electronic fraud.
