Breaking: US SEC Settles With Mango Markets For Unregistered Crypto Sales

The U.S. Securities and Exchange Commission (SEC) announced today that it has settled charges against Mango DAO, Blockworks Foundation, and Mango Labs LLC for their involvement in the unregistered sale of crypto assets on the Mango Markets platform. The agency’s enforcement action targets the sale of MNGO governance tokens and alleges that these entities failed to comply with federal securities laws, depriving investors of essential legal protections.

US SEC Settles With Mango Markets

According to the US SEC, Mango DAO, a decentralized autonomous organization, and Blockworks Foundation, a Panamanian entity, raised more than $70 million through unregistered offers and sales of MNGO tokens beginning in August 2021. The MNGO tokens, described as governance tokens of the Mango Markets platform, were sold to hundreds of investors globally, including those in the United States. 

The SEC stated that the unregistered offerings denied investors the protections of registration provisions under federal securities laws.

The Securities and Exchange Commission further charged Blockworks Foundation and Mango Labs for operating as unregistered brokers. These entities were accused of soliciting and recruiting users to trade securities, providing advice on investments, and facilitating securities transactions by managing customer accounts and funds. Without admitting or denying the allegations, Mango DAO, Blockworks Foundation, and Mango Labs agreed to settle the charges, including paying nearly $700,000 in civil penalties, destroying their MNGO tokens, and requesting the removal of MNGO tokens from trading platforms.

Regulatory Scrutiny of Crypto Brokers

In addition to unregistered sales, the Securities and Exchange Commission’s complaint highlighted the unregistered broker activities conducted by Blockworks Foundation and Mango Labs. The SEC noted that both entities played intermediary roles in the trading of securities on the Mango Markets platform, such as assisting customers with account setup, handling funds, and providing investment advice. 

The Securities and Exchange Commission emphasized that using decentralized or automated technology does not exempt these entities from compliance with federal securities laws.

Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets and Cyber Unit, stated that labeling a project as a DAO or employing open-source software does not change the nature of its regulatory obligations. The agency reiterated that any entity involved in securities intermediation must register or qualify for an exemption, regardless of its structure or the technology employed.

TrueUSD and Related Settlements

The Securities and Exchange Commission also announced a separate settlement with TrustToken, the issuer of the TrueUSD stablecoin, and TrueCoin. The SEC charged both entities with offering unregistered securities and making false marketing claims about the safety and backing of the USD-pegged stablecoin. The regulator alleged that the firms offered TrueUSD as an unregistered investment contract, misleading investors about the security of the product.

TrustToken and TrueCoin were also accused of operating a smart-contract-enabled lending platform, TrueFi, as an unregistered securities brokerage. These activities were conducted from November 2020 to April 2023. In response to the charges, TrustToken and TrueCoin agreed to pay $700,000 in penalties without admitting or denying the SEC’s allegations.