Mango Labs finds itself in yet another legal battle as it sues John Kramer and Maximilian Schneider, accusing them of embezzling $10 million from the Mango decentralized autonomous organization. The lawsuit alleges a breach of fiduciary duty, fraud, misrepresentation, and unjust enrichment, adding another chapter to the growing drama around the Mango DAO.
Legal Trouble Hits Mango DAO Again
The lawsuit, filed in the U.S. District Court of Puerto Rico, seeks monetary damages, including punitive damages and the restitution of wrongfully obtained funds. Mango Labs claims that Kramer and Schneider conspired to siphon off millions while also being key figures within the DAO. The accusations come in the wake of the trial of Avraham Eisenberg, who was found guilty in April of wire fraud and commodities manipulation for exploiting the DAO to the tune of $110 million.
The Mango DAO has been under the scrutiny of the U.S. Commodity Futures Trading Commission in an ongoing, non-public investigation. In a separate legal matter, the DAO settled with the U.S. Securities and Exchange Commission on September 27, agreeing to pay $700,000 in fines for unregistered securities and to destroy all remaining MNGO tokens.
Alleged Embezzlement Involves Secret Token Purchase
Kramer and Schneider, who held trusted roles in the DAO, allegedly orchestrated the embezzlement by purchasing MNGO governance tokens that had previously been held by the bankrupt FTX exchange. According to the lawsuit, the defendants claimed that acquiring the tokens would benefit the DAO and prevent them from falling into the hands of bad actors. However, it’s alleged that they bought the tokens in secret on April 1, 2024, depositing them into the DAO treasury anonymously.
Shortly after, on April 30, 2024, Kramer proposed a seemingly legitimate plan for DAO members to sell their MNGO tokens back to the DAO at an inflated price. The proposal passed with overwhelming support—backed by the 330 million MNGO tokens they had acquired—and Mango DAO paid $2.5 million for over 72.8 million tokens.
Lawsuit Highlights Fraudulent Misconduct
Mango Labs claims that the fraudulent scheme was quickly detected. Despite being confronted, Kramer and Schneider allegedly refused to return the tokens or acknowledge their wrongdoing. The lawsuit states, “Mango Labs and members of the Mango DAO have implored Defendants to transfer their unlawfully acquired MNGO tokens at cost, as is their obligation.” The defendants, however, have continued to resist and even attempted to pressure Mango Labs to drop the matter.
Adding to the complexity, unidentified individuals are accused of aiding Kramer and Schneider in the scheme. Mango Labs has vowed to serve legal papers to these unknown participants via their crypto wallets if their identities remain undisclosed.
The Fallout Continues
This lawsuit marks yet another controversy for Mango Labs and its DAO, a decentralized exchange that has seen its fair share of legal and regulatory battles. With ongoing investigations and multiple legal challenges, Mango Labs faces an uphill battle to restore trust and stability within its ecosystem.
