Mango Labs has accused two senior DAO contributors of embezzlement in the lawsuit. The pair hatched their scheme during the Avraham Eisenberg trial earlier this year.
Just weeks after settling a lawsuit from the US Securities and Exchange Commission, Mango Labs, the company behind Mango Markets Protocol, is filing its own legal action.
The complaintFiled in Puerto Rico on October 7, senior Mango DAO contributors John Kramer and Max Schneider were accused of embezzling more than $10 million dollars from the DAO at the expense of its other members.
“Defendants secretly purchased MNGO tokens from FTX, manipulated the MNGO market to artificially inflate the price of their tokens, and offloaded them to the Mango DAO in breach of their fiduciary duties,” the lawsuit states.
Kramer and Schneider have denied any wrongdoing.
The Mango DAO is a type of decentralized autonomous organization, or DAO, crypto collective. Members operate the Mango Markets Protocol using MNGO tokens, which give the DAO the ability to propose and vote on how to use the assets in its treasury.
The DAO's treasury, at one point, was worth over $70 million.
Mango markets struggled to recover after trader Avraham Eisenberg used the protocol in 2022.
The case highlights the often messy nature of DAOs, which have become a popular governance method among decentralized finance protocols.
Kramer previously said News The situation is “misunderstood by competitors who fear the ongoing rebirth of mangoes.”
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At the same time, Schneider said News Critics of his and Cramer's actions say they are working with a competing project and are deliberately “fostering distrust.”
In September, Mango Labs, Mango DAO, and Blackworks Foundation settled SEC suit By agreeing to pay $700,000 in fines and canceling the Mango DAO by destroying all MNGO tokens.
Mango Labs, Mango DAO and Blackworks Foundation have neither admitted nor denied the allegations.
Trial timing
If a judge allows the case to go to trial at Mango Labs' request, it won't be the first one connected to Mango Markets.
In April, a jury convicted crypto trader Avraham Eisenberg of fraud and market manipulation for allegedly rigging the $110 million mango market in 2022.
The suit alleges that Kramer and Schneider used Eisenberg's investigation as cover to conduct their own dealings.
The lawsuit claims that since most Mango DAO members were witnesses and unable to communicate during the trial, Cramer and Schneider could more easily execute their scheme.
$10 million scheme
The episode began with crypto exchange FTX looking for a buyer for around 333 million MNGO tokens as part of its liquidation proceedings.
The lawsuit alleges that Cramer and Schneider initially planned to buy MNGO tokens on behalf of the DAO, a positive move for the collective.
However, the suit claims that the couple secretly bought MNGO below its market value. They allegedly used the tokens to push the DAO's proposal to allow them to sell the tokens to the DAO at a higher price, a move that drained the DAO's coffers at the expense of other members.
When other Mango DAO members became suspicious of the situation, Kramer and Schneider refused to admit that they had bought the 333 million MNGO, saying instead that a “strategic and activist investor” had done so.
The lawsuit is the culmination of a months-long dispute at Mango DAO over the pair's alleged purchase.
Along with the suit, onchain Evidence Schneider and Kramer's business entity, called CKS Systems, is said to be behind the purchase.
Wallets connected to both CKS Systems and the 333 million MNGO buyer sent and received large amounts of crypto from the same address.
This is a sign that the two entities are one and the same.
Is the settlement violated?
The lawsuit also alleges that Cramer and Schneider tried to block legal funding after they were accused of misappropriating funds for Mango Labs.
“They threatened to withhold funding for Mango Labs' defense of Mango DAO's legal rights, including against Eisenberg,” the lawsuit states.
In addition, after Mango Labs settled with the SEC, Schneider pushed the DAO's proposal that the SEC give him 60 million MNGO tokens from the DAO's treasury, in violation of the settlement terms.
It remains to be seen whether this will affect the settlement subject to court approval.
There is Tim Craig News' Edinburgh-based DeFi correspondent. Reach out with tips at [email protected].
Related TopicsMango Markets
