Mango Markets, a decentralized exchange (DEX) built on the Solana blockchain, is considering paying a $500,000 fine to resolve ongoing allegations from the Commodity Futures Trading Commission (CFTC). The proposal, submitted to Mango DAO on September 22, outlines a settlement that could halt further regulatory action from the CFTC.
According to the proposal, the CFTC is investigating Mango Markets for allegedly failing to register as a commodities exchange, offering services illegally to U.S. customers, and lacking adequate Know Your Customer (KYC) measures. Despite the investigation being “ongoing and nonpublic,” the DAO’s legal team recommended settling the issue with a $500,000 civil penalty to prevent the CFTC from taking the matter to court.
Settlement to Avoid Litigation
While the full details remain confidential due to the ongoing investigation, Mango DAO representatives stated that reaching a settlement would spare the exchange from potential litigation. The proposal makes it clear that Mango DAO would neither admit nor deny any wrongdoing if the settlement is accepted by CFTC commissioners. This approach mirrors previous legal settlements aimed at mitigating the platform’s regulatory exposure.
At the time of writing, Mango DAO members overwhelmingly support the settlement, with 123,475,000 votes in favor and none opposing it, indicating that the proposal is on track for approval.
Regulatory Challenges Continue
This settlement proposal comes just weeks after Mango DAO paid a $670,000 fine to the Securities and Exchange Commission (SEC). That penalty addressed allegations that Mango Markets had violated U.S. securities laws by selling its MNGO token as an unregistered security in 2021. The DAO agreed to the settlement in August, transferring the sum in USD Coin (USDC) to the SEC to close the investigation.
Mango Markets has faced significant challenges since a $110 million exploit in October 2022. Trader Avraham Eisenberg manipulated the protocol for personal gain, leading to multiple investigations by U.S. authorities, including the SEC, CFTC, and Department of Justice (DOJ). Eisenberg later faced charges of fraud and market manipulation in April 2023. These events have spurred closer scrutiny of Mango Markets, prompting regulatory actions from multiple agencies.
Mango Markets’ Struggles Amid Regulatory Scrutiny
The series of fines and settlements underscores the regulatory hurdles Mango Markets has been grappling with since the 2022 exploit. Both the SEC and CFTC have launched investigations, leading to penalties related to securities law violations and commodities trading regulations. Mango Markets’ legal efforts to resolve these matters aim to protect the platform from future legal action, but the ongoing scrutiny highlights the challenges decentralized exchanges face in navigating U.S. regulatory frameworks.
