The SEC released a news release on Friday announcing that they had resolved their case with Mango Markets. This DeFi platform based in Solana is accused by the SEC of dealing unregistered securities.
Mango DAO, the Blockworks Foundation, and Blockworks Media Company (which isn’t the Blockworks company that sends you this email) are all required to make payments as part of the agreement. “nearly $700,000” In addition, Mango Markets will remove its native token from all other platforms.
This move was foreshadowed by the DAO’s vote to approve a SEC settlement one month prior. It also voted five days ago to settle with CFTC. This means that Mango DAO is likely going to be on the hook soon for more settlement money. All of this comes as no surprise, since Mango was in the crosshairs of regulators after Avi Eisenberg stole $110 million by using a “highly profitable trading strategy” By 2022.
In the fine print of the agreement, revealed on Friday, the SEC made a new case that SOL is a security.
The section on “Crypto Assets that are Offered and Sold as Securities” The SEC describes the history of SOL near the end the Mango Markets lawsuit. It was first sold to investors by Solana Labs at the start of Solana to help fund blockchain development. The SEC claims that Solana Labs, and its foundation, have attempted to defraud investors in the years since. “increase value and demand for SOL.”
SOL does not pass the Howey Test, which is a standard for evaluating securities. Everyone in the crypto world knows it by now: Investing money into a joint enterprise and expecting to make profits from the work of others.
In essence, this Mango lawsuit is a rehash of the SEC’s 2023 complaint filed against Coinbase. That case is still pending in the courts. The SEC has once again attacked the Solana Foundation for claiming to be a nonprofit organization. “non-profit foundation … dedicated to the decentralization, adoption, and security” Solana.
“In fact,” According to SEC, Solana Labs has transferred 167 millions SOL tokens (SOL Tokens) to a foundation that was mandated with providing “expanding and developing the ecosystem of the Solana protocol.” The Solana Foundation has not responded to a comment request.
However, it is likely that the SEC case needs to be retooled as well: in both this complaint and the one from 2023, the SEC cites the burn mechanism of the network for transaction fees. This was a method used by Solana to convince investors they can expect profits on their investments. Solana’s validators voted recently to eliminate the burn mechanism of priority fees that make up the majority of transaction fees. Anza now works to implement this change.
SOL’s potential to be a security poses a serious existential threat for the SOL network. The SEC’s current argument is that crypto platforms other than Prometheum were not designed to deal in securities. If the SEC wins, it may be difficult for US investors and traders to purchase or sell SOL.
The course of events could change after the Presidential election. SOL investors should hope that MNGO tokens won’t be the next MNGO.
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