On Friday, September 27, the U.S. Securities and Exchange Commission (SEC) announced the resolution of charges against three entities—Mango DAO, Blockworks Foundation, and Mango Labs LLC. The charges stemmed from their roles in the unregistered sale of crypto assets on the Mango Markets platform.
Overview of SEC’s Charges
The SEC’s enforcement action centers on the sale of MNGO governance tokens. The agency accused these organizations of failing to adhere to federal securities laws, consequently depriving investors of crucial legal protections.
According to the regulator, the decentralized autonomous organization Mango DAO and the Panamanian entity Blockworks Foundation raised over $70 million through the unregistered sale of MNGO tokens, commencing in August 2021. These tokens, which are characterized as governance tokens for the Mango Markets platform, were marketed to numerous investors worldwide.
The agency asserted that the lack of registration for these offerings prevented investors from benefiting from the legal protections guaranteed under federal securities laws. Furthermore, the regulator charged Blockworks Foundation and Mango Labs with operating as unregistered brokers. Moreover, the allegations state that these organizations solicited and recruited users to engage in trading activities involving securities, provided investment advice, and managed customer accounts and funds.
The Settlement Agreement
In a settlement agreement, Mango DAO, Blockworks Foundation, and Mango Labs, while neither admitting nor denying the charges, consented to pay approximately $700,000 in civil penalties. Additionally, they have agreed to terminate their MNGO tokens. Additionally, they will seek the removal of these tokens from trading platforms, according to today’s announcement.
The agency’s complaint also outlined the unregistered broker activities conducted by Blockworks Foundation and Mango Labs. In addition, the agency noted that both entities acted as intermediaries in securities trading on the Mango Markets platform. They aid customers with account setups, managing funds, and offering investment guidance.
The regulator made it clear that using decentralized or automated technology does not exempt organizations from fulfilling federal securities regulations. Jorge G. Tenreiro, the Acting Chief of the agency’s Crypto Assets and Cyber Unit, highlighted that merely identifying a project as a DAO or utilizing open-source software does not alter the regulatory responsibilities that apply. He reiterated that any entity involved in the intermediation of securities is required to register or qualify for an exemption, irrespective of its organizational structure or technological basis.