Mango Markets, Crypto Exchange Atop Solana Blockchain, Sees Legal Bills Swell a Year After Alleged $116M Heist

Nearly a year after alleged crypto market manipulator Avi Eisenberg raided the blockchain-based trading protocol Mango Markets for more than $100 million, the platform’s stakeholders are struggling to afford growing legal expenses.

And based on the early voting results on a key proposal from the platform’s founder, they appear reluctant to keep footing the bill.

Mango Labs, the main company building the Solana blockchain-based exchange, is short on cash after burning nearly $2 million – its entire 2023 budget – six months ahead of schedule.

Now, with more “regulatory inquiries” looming, the company has asked members of Mango DAO – the so-called decentralized autonomous organization or DAO that oversees the protocol – to approve another $2 million for legal expenses. A person or account gets the right to vote by acquiring Mango DAO’s MNGO tokens.

But the Mango DAO voters aren’t so keen to cut the check. This past weekend, they rejected the funding request from Mango Labs founder Daffy Durairaj, with one voter calling it a “money pit thus far.” In forum posts, project insiders demanded more transparency into how the company manages its budget.

According to the website Realms, there’s about $89 million in the Mango DAO treasury, but most of that is denominated in MNGO tokens, and the market for those might not be liquid enough to sell them quickly and easily. Project insiders say that the main source of funding would likely come from a $15.3 million stash of dollar-linked stablecoins within the Mango Dao treasury, primarily denominated in USDC.

The internal political tension highlights the ongoing ramifications and consequences of crypto hacks, often lasting long beyond the simple theft of funds. Mango Labs is mounting a pricey civil suit against Eisenberg over his October 2022 theft of $110 million in crypto and also participating in the sprawling, and expensive, federal regulatory and criminal cases against him.

“This funding is necessary to handle legal costs of regulatory inquiries that have arisen after the exploit last year, cooperation with law enforcement and regulators and pursuing legal claims against Avi Eisenberg to help recover funds for the DAO,” Durairaj said in Mango’s governance forums.

But those efforts are quickly burning through what Mango Markets co-founder Max Schneider wrote was an “outsized” portion of the DAO’s stablecoin treasury of $15 million.

Durairaj personally holds enough MNGO governance tokens to muscle through the vote, former project insiders say. But he may be unwilling to do so given the spotlight the SEC has already placed on the centralization of Mango’s “so-called ‘governance token.’”

Despite the pushback and first vote’s barreling toward defeat Monday, Durairaj has initiated a second, identical funding proposal.

Durairaj did not respond to a request for comment.