For The First Time, CFTC Sues A DAO: Details
- The CFTC has filed a lawsuit against bZeroX, LLC (now known as the Ooki DAO) along with its founders Tom Bean and Kyle Kistner and the holders of the governance tokens of the DAO as well in the U.S. District Court for the Northern District of California.
- One CFTC commissioner, Summer Mersinger issued a dissent and added that she is not supporting the agency’s decision to hold the DAO token holders accountable for violations
The Commodity Futures Trading Commission (CFTC) has, for the first time in its existence, filed a lawsuit against a decentralized autonomous organization, bZeroX, LLC (now known as the Ooki DAO), along with its founders Tom Bean and Kyle Kistner and the holders of the governance tokens of the DAO as well, in the U.S. District Court for the Northern District of California.
In a statement on Thursday, the CFTC stated that it is charging the respondents for a number of reasons ranging from illicit offering of leveraged and margined retail commodity transactions in cryptocurrencies, engaging in activities only registered futures commission merchants (FCM) can perform, to failing to adopt a customer identification program as part of a Bank Secrecy Act (BSA) compliance program, which is a major requirement for any entity providing services similar to the DAO.
“The respondents engaged in these activities in connection with a decentralized blockchain-based software protocol that functioned similarly to a trading platform. The order requires the respondents to pay a $250,000 civil monetary penalty and to cease and desist from further violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged,”
the CFTC said.
The lawsuit has also been filed in the name of Ooki DAO by the regulatory authority since it is the successor of bZeroX platform and operates using the same software. Moreover, the CFTC believes that since Ooki DAO was a decentralized autonomous organization, it used its status to eavade regulatory oversight.
The regulatory authority added that the holders of the governance token of the DAO are also to be added in the lawsuit because the DAO was not registered with the Commission and the holders were in the US soil when they voted on the decisions of the DAO, which is illegal.
“The bZx founders were wrong, however,” the agency stressed while adding that “DAOs are not immune from enforcement and may not violate the law with impunity.”
On the other hand, one CFTC commissioner, Summer Mersinger issued a dissent and added that while she supports almost every thing pointed out by the regulatory authority, she is not supporting its decision to hold the DAO token holders accountable for violations since it neither had the legal authority or standing to do so.
“I cannot agree with the Commission’s approach of determining liability for DAO token holders based on their participation in governance voting,”
the Commissioner wrote.
Moreover, she also stated that if the original owners of bZeroX and the co-founders were in the focus, she would’ve agreed with the agency’s approach but since the holders were also dragged in the same, she is withdrawing support.
A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.
