Mango Markets faces internal issues amid legal battles

Nearly a year after an alleged crypto market manipulation incident involving Avi Eisenberg, the blockchain-based trading protocol Mango Markets finds itself entangled in financial difficulties. Stakeholders are grappling with escalating legal costs, and initial voting results suggest a hesitancy to continue funding these expenses. Mango Labs, the primary entity behind the Solana blockchain-based Mango Markets exchange, is facing a cash shortage. It depleted its entire 2023 budget of nearly $2 million ahead of schedule, leaving it financially strained.

Mango Markets DAO divided over releasing funds for legal battles

With impending “regulatory inquiries” on the horizon, the company behind Mango Markets is seeking approval from Mango DAO – the decentralized autonomous organization overseeing the protocol – for an additional $2 million in legal expenses. Voting on this matter is done using Mango DAO’s MNGO tokens. However, Mango DAO voters have exhibited reluctance to approve the requested funds. Recently, they rejected the funding proposal presented by Mango Labs founder Daffy Durairaj.

One voter characterized the situation as a “money pit,” prompting project insiders to demand greater transparency regarding the company’s budget management. As reported by Realms, approximately $89 million is held within the Mango DAO treasury. However, the majority of these funds are tied up in MNGO tokens, potentially lacking the necessary liquidity for swift sales. The primary source of funding for the legal expenses is expected to stem from a $15.3 million reserve of dollar-linked stablecoins, primarily denominated in USDC, within the Mango DAO treasury.

The ongoing internal discord underscores the lasting repercussions of crypto-related breaches, which often extend beyond immediate financial losses. Mango Labs is actively pursuing a civil lawsuit against Avi Eisenberg, who allegedly pilfered $110 million in crypto back in October 2022. Additionally, the company is involved in costly federal regulatory and criminal proceedings related to the incident.

In-house issues and the lingering legal problems

Daffy Durairaj, in Mango’s governance forums, emphasized the necessity of the requested funding to address legal costs arising from regulatory inquiries linked to the previous year’s exploit. The expenses also encompass collaboration with law enforcement and regulators, as well as the pursuit of legal claims against Avi Eisenberg in an attempt to recover funds for the DAO.

These endeavors are consuming a significant portion of Mango DAO’s stablecoin treasury, as noted by Mango Markets co-founder Max Schneider. The strain on resources is evident, particularly given the pronounced focus the U.S. Securities and Exchange Commission (SEC) has placed on Mango’s “governance token” and concerns of centralization. In the face of resistance and an impending defeat of the initial vote, Daffy Durairaj has initiated a second funding proposal identical to the first.

This move demonstrates a commitment to securing the necessary resources for the company’s ongoing legal battles and regulatory challenges. The outcome of the impending vote will undoubtedly shape the path forward for Mango Markets and shed light on the crypto industry’s ability to navigate complex legal and financial intricacies in the aftermath of security breaches.