A United States district judge has issued an default judgment order requiring Ooki DAO to close permanently and pay a civil penalty of $643,542.
Today the CFTC’s Division of Enforcement Director Ian McGinley released a statement on the Ooki DAO litigation victory. Learn more: https://t.co/MInNeKLeH5
—CFTC (@CFTC) June 9, 2023
Today, CFTC Enforcement Division Director Ian McGinley released a statement on the Ooki DAO litigation victory. More information in the link.
The Commodity Futures Trading Commission (CFTC) —or Futures Trading Commission— initially filed a lawsuit against Ooki DAO in September 2022, accusing the decentralized autonomous organization (DAO) of illegally offering retail margin and leverage trading services, and of “illegally acting” as a futures commission trader.
A judgment by default there was been on the table for months after Ooki DAO misses the January 2023 deadline to respond to the lawsuit.
With the order now official as of June 9, the CFTC public a statement the same day describing the lawsuit as a “landslide victory” and outlining the full scope of the default judgment.
Ooki DAO has received “permanent trading and registration bans”; You have been ordered to shut down the Ooki DAO website and “remove its content from the Internet”stated the commission, adding that:
Crucially, in a precedent-setting decision, the court held that the Ooki DAO is a “person” under the Commodity Exchange Act and therefore can be held liable for violations of the law. The court then held that Ooki DAO did, in fact, violate the law as charged.”
This case against Ooki DAO was unique in that it was one of the first times a government agency went after a DAO and its token holders.
Before this case, the prevailing belief among industry players was that DAOs and decentralized finance platforms were shielded from regulatory scrutiny due to their decentralized nature.
A key issue, however, is that the CFTC alleged that Tom Bean and Kyle Kistnerthe founders of Ooki DAO’s predecessor, bZeroX, had intentionally tried to cede ownership of their non-Ooki DAO compliant trading platform to avoid any potential legal retaliation.
“The founders created the Ooki DAO for an evasive purpose, and with the explicit goal of operating an illegal trading platform without legal liability”noted the director of the CFTC’s enforcement division, Ian McGinley, adding that:
“This decision should serve as a wake-up call to anyone who believes they can circumvent the law by adopting a DAO structure, with the intent to insulate themselves from law enforcement and ultimately put the public at risk.” .
Here in Ooki, the court found that DAO could be sued as California unincorporated association by CFTC in a federal case because state law applies to these formalities, and under Cali. law, “mutual consent” to form an association can be established by just holding a DAO token (!) pic.twitter.com/OR9fOPh2dT
— ross (@z0r0zzz) June 9, 2023
Here in Ooki, the court found that the DAO could be sued as a California unincorporated association by the CFTC in a federal case because state law applies to these formalities, and under California law, “mutual consent” to form an association can be established just by having a DAO token (!)
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