A new lawsuit filed by the US regulator (SEC)

The US regulator, the US Securities and Exchange Commission (SEC), has decided to prosecute Avraham Eisenberg, a trader in decentralized finance (DeFi). He is accused of having dried up the decentralized exchange Mango Market, based on the Solana token. From the SEC’s side, this is not the first such lawsuit.

MNGO Token: Qualification as a security by the regulator

This is the latest deal to spring from Avraham Eisenberg’s “highly profitable business strategy.” The SEC indicted decentralized finance trader Avraham Eisenberg on Friday. He is the subject of a lawsuit for draining $116 million from the Solana-based decentralized exchange Mango Markets. Eisenberg is 27 years old and has already faced criminal charges. The latter concerned fraud relating to raw materials. He allegedly was instrumental in orchestrating a highly profitable trading strategy against Mango Markets last October.

This action could have wider consequences. In fact, the SEC’s accusations are based on the fact that the Mango Markets governance token would be a security. This argument has already been made in previous actions that warned the cryptocurrency industry. In addition to his actions, the SEC complaint details the standards of Howey’s test. This is the test used by the agency to qualify MNGO as a security. The SEC has already issued this reminder in previous cases. This was the case, for example, with the insider trading case of the former director of Coinbase (COIN). The SEC had labeled nine tokens as unregistered securities without directly accusing the token issuers or Coinbase. As in this case, Mango’s action does not target Mango Markets, the decentralized exchange.

A considerable legal risk

The SEC’s devious listings of tokens it considers securities have given the creeps to law firms representing crypto clients. The agency then said that despite labeling MNGO a “governance token,” it would be bought and sold as a cryptocurrency. Indeed, its owners would have profit expectations and would have engaged in a joint venture. These are two of the factors the SEC looks for in identifying investment contracts that fall under securities laws. Furthermore, MNGO holders could use their tokens to vote in decisions governing the operations of Mango Markets.

As a result, SEC Chairman Gary Gensler and his law enforcement officials have recently stepped up their warnings. They said they are losing patience with unregistered stocks and the unregistered exchanges they trade on. The Commodity Futures Trading Commission already hit Eisenberg last week accusing him of manipulating the market.

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Krull's avatar
Krull

To the angelism of the intercessors of the current monetary system, I oppose DeFi, digital assets and the metaverse. Lawyer in Luxembourg, I am interested in cryptocurrency investment funds.

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