Mango Markets Nears $1.2M in Regulatory Fees as CFTC Settlement Looms

Key Takeaways

• Mango Markets has faced significant regulatory scrutiny and fines from the U.S. SEC and CFTC.
• The CFTC is investigating Mango Markets for potential violations related to commodities exchange registration.
• The DAO is considering a settlement with the CFTC involving a $500,000 civil penalty.

Solana-based decentralized exchange Mango Markets continues to grapple with regulatory challenges. The DEX is facing a potential $500,000 fine from the U.S. Commodity Futures Trading Commission (CFTC) for alleged violations of commodities regulations.

This marks the second significant regulatory settlement Mango Markets has faced in recent months, following a $700,000 settlement with the U.S. Securities and Exchange Commission (SEC) .

Mango Markets Faces $1.2M in Fees

Solana-based decentralized exchange Mango Markets is facing another potential fine, this time from the U.S. Commodity Futures Trading Commission (CFTC). According to a recent proposal from Mango Markets ‘ legal team to the Mango DAO, the DEX is under investigation for alleged violations of commodities exchange registration requirements, illegal services offered to US customers, and inadequate Know Your Customer (KYC) measures.

The legal team has suggested settling with the CFTC for approximately $500,000. If approved by the DAO , this would add to the $700,000 settlement reached with the SEC last month, bringing the total fines to $1.2 million.

Mango Markets’ proposal to settle with the U.S. CFTC. l Credit: Mango Markets

Due to the ongoing nature of the CFTC investigation and the confidentiality of the settlement, the full details of the allegations have not been publicly disclosed.

In January 2023, the CFTC filed a civil enforcement action in the U.S. District Court for the Southern District of New York, “charging Avraham Eisenberg with a fraudulent and manipulative scheme to unlawfully obtain over $110 million in digital assets from a purported decentralized digital asset exchange”, the commission said .

Previous SEC Settlement

Mango Markets is not new to situations like this, as it faces repeated regulatory scrutiny. In just over a month, the DAO has proposed two substantial settlements to resolve potential legal actions.

In August, Mango agreed to pay $670,000 to the SEC to settle allegations of violating U.S. securities laws related to the sale of its native Mango (MNGO) token. This followed a $700,000 settlement proposed in the same month to address similar concerns.

These regulatory actions stem from investigations launched by the SEC, the CFTC, and the United States Department of Justice following a $110 million exploit on Mango Markets in October 2022. Trader Avraham Eisenberg’s exploit led to criminal charges and increased regulatory scrutiny of the DEX.

Furthermore, in December 2022, the U.S. Attorney’s Office for the Southern District of New York unsealed a criminal complaint charging Eisenberg with commodities fraud and manipulation.

What’s Next?

If approved, the settlement would involve a joint payment of $500,000 by the DAO, Mango Labs, and Blockworks. The DAO representative would be authorized to negotiate the settlement , binding upon CFTC acceptance. Compliance is essential, requiring the DAO to adhere to the settlement terms and avoid public denials of the allegations.

Funds will be held in escrow while the CFTC reviews the proposal. Once accepted, the DAO representative can release the funds and fulfill any related obligations regarding MNGO tokens.

Additionally, the DAO would indemnify the representative against costs arising from the settlement, barring any serious misconduct.

“Balancing confidentiality restrictions with the need for transparency to the members of the DAO, the terms of the proposal set forth the general framework of the proposed settlement with the CFTC. A settlement with the CFTC would avoid the CFTC bringing any litigation against the DAO with respect to these allegations,” Mango Markets said in its proposal.