Mango Labs, the operator of Solana-based decentralized exchange Mango Markets, has filed a legal action against two senior ex-employes, John Kramer and Max Schneider, for allegedly embezzling approximately $10 million.
The complaint has been filed in a San Juan, Puerto Rico, federal court. The United States District Judge Gina Méndez-Miró is presiding over the case which involves charges of market manipulation, fraud, and breach of trust.
The lawsuit comes after Mango Labs recently settled a legal battle with the US Securities and Exchange Commission (SEC) by agreeing to pay a $223,228 fine and dissolve the Mango DAO, destroying all its MNGO tokens.
Mango Labs Sues Former Employees
According to the filed complaint, Kramer and Schneider, who held trusted positions, allegedly abused their power for personal gain. They were responsible for managing sensitive tasks, including the Mango DAO treasury and addressing a $100 million attack on Mango Markets.
In October 2023, the FTX bankruptcy estate sold its Mango tokens (MNGO). The defendants secretly purchased 330 million tokens and hid their identities using multiple crypto wallets. They then proposed a vote to sell these tokens back to Mango DAO at an inflated price.
The alleged gimmick gave the defendants excessive voting power, allowing them to manipulate the outcome. As a result, Mango DAO bought 73 million tokens for $2.5 million. The plaintiff claims the defendants have refused to return the tokens at cost, breaching their obligations and attempting to pressure Mango Labs to drop the issue.
Mango Market Struggles
Mango Markets faced a devastating $116 million exploit in October 2022. Avraham Eisenberg took advantage of a vulnerability in the platform’s smart contract, draining user funds. This security breach revealed the platform’s weaknesses and raised concerns about the safety of user assets.
The exploit also drew regulatory attention to Mango Markets. As regulations evolve, the platform addresses concerns over market manipulation and fraud. Regulatory scrutiny led to legal challenges, operational restrictions, and compliance costs, further damaging the platform’s reputation.
Mango Markets also struggles with competitive DeFi space, vying with other Solana-based protocols like Jupiter, Kamino, and Drift offering innovative features.
Data from DefiLlama, a blockchain analytics platform shows that since the Eisenberg exploit, Mango Markets’ Total Value Locked (TVL) has tumbled by over 85% currently at $14.74 million.
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