Mango Labs Accuses DAO Members of $10 Million Fraud in New Lawsuit
On Monday, October 7, 2024, Mango Labs filed a lawsuit in the US District Court for the District of Puerto Rico against John Kramer and Maximilian Schneider, accusing them of embezzling $10 million from the Mango decentralized autonomous organization (DAO). The lawsuit alleges that Kramer and Schneider, who hold trusted positions within the DAO, conspired to illicitly profit by acquiring the DAO’s MNGO governance tokens from the bankrupt FTX on behalf of the organization.
The suit claims that the defendants proposed to buy FTX’s holdings of MNGO tokens at a favorable price, assuring DAO members that this move would prevent bad actors from acquiring the tokens. However, the complaint alleges that, on or around April 1, 2024, Kramer and Schneider secretly purchased the MNGO tokens and deposited them anonymously into the DAO treasury.
Subsequently, Kramer proposed a governance vote for DAO members to sell the MNGO tokens back to the DAO at an inflated price. On April 30, 2024, the proposal passed, resulting in the DAO purchasing over 72.8 million MNGO tokens for approximately $2.5 million. The lawsuit asserts that this transaction was deceptive, as it was based on the defendants’ earlier illicit acquisition of the tokens.
Mango Labs’ complaint emphasizes that the organization has repeatedly requested the defendants to return the unlawfully acquired MNGO tokens at their original cost. Despite these requests, the defendants allegedly pressured Mango Labs to cease their inquiries into the matter.
The lawsuit charges Kramer and Schneider with multiple offenses, including breach of fiduciary duty, fraud, misrepresentation, and unjust enrichment. Mango Labs is seeking monetary damages, along with exemplary and punitive damages, restitution, and the disgorgement of funds obtained through their alleged misconduct, including interest and fees.
This legal action comes on the heels of significant challenges faced by the Mango DAO. Recently, Avraham Eisenberg was found guilty of exploiting the DAO for $110 million, with convictions for wire fraud, commodities fraud, and commodities manipulation dated April 18, 2024. The fallout from this case has drawn further scrutiny to the operations of Mango Markets, the decentralized exchange operated by the Mango DAO.
Additionally, on September 27, 2024, Mango DAO settled charges with the US Securities and Exchange Commission (SEC) related to unregistered securities, agreeing to pay a fine of $700,000 and destroy all existing MNGO tokens.
Please contact BlockTribune for access to a copy of this filing.
