Alleged crypto fraudster and thief Avi Eisenberg is set to go on trial in the coming months for stealing over $100 million from Mango Markets. But Mango Markets continues to face regulatory peril of its own.

The decentralized crypto exchange (DEX) is facing "inquiries" in the United States stemming from that October 2022 heist, according to posts in the project's Discord server. Now the DEX's governing body, called MangoDAO, is voting on whether to appoint a representative who can triage "U.S. regulatory matters" on its behalf.

Last bull cycle Mango Markets was the top on-chain trading venue for Solana-based crypto investors. Then it lost millions of dollars to one aggressive trader – Eisenberg – who allegedly used illegal market manipulation tricks to steal from Mango Markets' other customers. The Securities and Exchange Commission, Commodity Futures Trading Commission, and Department of Justice all sued that trader, as did a founder of Mango Markets.

While many Solana protocols navigate booming crypto markets, Mango Markets is instead dealing with how to answer questions from regulators who only trained their attention on the DEX after it was the victim of an alleged crime. The posts did not name the regulators asking questions, but a proposal being voted on describes inquiries that need to be handled stemming from the SEC, CFTC and DOJ's investigation of Eisenberg.

The situation underscores the perils of creating permissionless trading infrastructure atop blockchains, and leaving their operations to decentralized autonomous organizations, or DAOs. If crypto founders thought these attributes might shield them from legal scrutiny, then precedent is proving otherwise. The SEC and CFTC both brought suits against DAOs in 2023.

Mango Markets' position in the crypto market left it vulnerable to regulatory security in the U.S., legal experts have previously told CoinDesk. As discussed in the various lawsuits against Eisenberg, it has offered trading services to U.S. that regulators believe should be under their oversight.

Compounding the tenuous situation, the company Mango Labs – the DEX's previous legal guardian – is taking a step back. Its CEO Dafydd Durairaj said on Mango's Discord server Thursday that his company "might have a conflict of interest in strict legal terms" that prevent it from going to bat for the DEX.

That position is a change from one year ago, when Durairaj told the DEX's community that Mango Labs was committed to its protection "even if the SEC wants to file a lawsuit." In return, the community repeatedly voted to give Mango Labs millions of dollars in crypto that it used to pay swelling legal bills, according to archived forum posts.

Mango Markets' community of token holders have governing rights over the DEX and use their MNGO tokens to approve every change to its operations. On Wednesday they were informed of the "regulatory matters" in a Discord post and also presented a solution.

Adrian Brzeziński, a 29 year-old crypto developer and longtime contributor to Mango Markets, proposed his three month old company, CyberByte, act as the DEX's representative to regulators.

CyberByte would have the power to hire lawyers for the DEX and "partake in confidential and privileged communications with legal counsel to facilitate amicable resolutions to the U.S. regulatory matters."

The DEX's voters – the community of token holders – would have final say over any "resolution," according to Brzeziński's posts. He requested $250,000 to foot the new legal bills.

On Friday the vote over his proposal was sailing toward passage with unanimous approval from token holders who participated. But in the Discord server one community pressed for more details on how the proposal came together.

Brzeziński declined to answer the Discord questions ahead of the vote's passage. He declined to comment when contacted by CoinDesk.

UPDATE (Jan. 5, 2024, 15:22 UTC): Adds additional context.

Mango Markets SEC CFTC

Danny Nelson

Danny is CoinDesk's managing editor for Data & Tokens. He formerly ran investigations for the Tufts Daily. At CoinDesk, his beats include (but are not limited to): federal policy, regulation, securities law, exchanges, the Solana ecosystem, smart money doing dumb things, dumb money doing smart things and tungsten cubes. He owns BTC, ETH and SOL tokens, as well as the LinksDAO NFT.