As a seasoned analyst with over two decades of experience in financial markets and regulatory compliance, I find it disheartening to witness yet another instance of unregistered securities activity in the rapidly evolving crypto space. The SEC’s charges against Mango DAO, Blockworks Foundation, and associated entities serve as a stark reminder that regulatory oversight is essential for investor protection, regardless of the technological advancements or novelty of the instruments involved.
The Securities and Exchange Commission (SEC) alleges that both Mango DAO and Blockworks Foundation violated securities laws by selling ‘MNGO’ tokens without registration, and also by engaging in unregistered brokerage activities concerning the Mango Markets platform.
As reported by the Securities and Exchange Commission (SEC), both Mango DAO, a decentralized autonomous organization, and Blockworks Foundation, headquartered in Panama, gathered over $70 million through the sale of MNGO tokens, starting from August 2021. The SEC claims that these entities circumvented regulations designed to protect investors by not adhering to federal registration requirements.
All charged parties settled the charges, agreeing to destroy their tokens and pay a fine.
On Mango Markets, the MNGO tokens functioned as voting tokens, empowering their possessors to influence decisions regarding how this cryptocurrency trading platform is run. Mango Markets represents an online venue for traders to deal with various digital assets.
Recently, Mango Markets set aside $250,000 worth of USD Coin (USDC) to handle U.S. regulatory issues, which arose due to a sequence of regulatory difficulties. One such challenge was the 2022 hack by Avraham Eisenberg that caused losses amounting to $116 million.
As an analyst, I’m reflecting on Bill Hughes’ insights from X, where he highlighted that the hack of Eisenberg’s Mango Market and the subsequent legal proceedings cast a critical eye over the entire project. Over time, this scrutiny led to settled Securities and Exchange Commission (SEC) charges against the project and a financial penalty.
In simpler terms, the Initial Coin Offering (ICO) for Mango Tokens did not ask for verification of non-US status, thereby allowing US residents to participate. Interestingly, US individuals were even involved in the creation of Mango Markets and received a share of tokens as a form of compensation for their contributions. The official Mango Decentralized Autonomous Organization (DAO) website was accessible to US citizens. It’s worth noting that US residents also utilized Mango Markets, albeit with some potential implications.
— Bill Hughes : wchughes.eth 🦊 (@BillHughesDC) September 27, 2024
Unregistered brokers
The Securities and Exchange Commission (SEC) accused Blockworks Foundation and Mango Labs LLC of functioning as unlicensed brokerages. They claim that these entities convinced users to trade on Mango Markets, while also offering guidance and appraisals about potential investment options.
As per the SEC’s statement, these entities were essentially functioning as brokers, yet they lacked the essential legal authorization required for such activities.
On September 18th, much like the situation, the Securities and Exchange Commission (SEC) accused Rari Capital and its founders of functioning as unlicensed dealers. It is claimed that they facilitated unregistered securities transactions via investment products containing over a billion dollars worth of cryptocurrency assets.
In a nutshell, any organization looking to sell securities like stocks or investment-focused tokens must first register with the SEC. This is to guarantee that investors are safeguarded and that the entities comply with detailed disclosure guidelines and various other regulations.
Mango Markets destroying tokens
The organizations – Mango DAO, Blockworks Foundation, and Mango Labs – have chosen to resolve the Securities and Exchange Commission’s claims, neither conceding nor disputing the accusations brought against them.
All charged parties agreed to pay nearly $700,000 in penalties, destroy their MNGO tokens, and request that these tokens be removed from trading platforms. They also agreed not to solicit trading of MNGO tokens in the future.
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2024-09-27 22:42