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A U.S. District Judge has issued a judgment in absentia that requires the decentralized organization Ooki DAO to permanently close and pay a civil monetary 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
The Commodity Futures Trading Commission originally filed a lawsuit against Ooki DAO in September 2022, accusing the DAO of illegally offering retail margin trading and leveraged trading services, as well as acting “illegally” as a commission seller of futures.
The default decision has, in fact, been on the cards for months after Ooki DAO missed the deadline to respond to the lawsuit in January.
As the June 9 order became official, the CFTC released a statement the same day describing the lawsuit as a “decisive victory” as it lays out the full scope of the default decision.
Ooki DAO received a “permanent trading and registration ban” and was further ordered to shut down the Ooki DAO website and “remove its contents from the Internet”.
“Significantly, in a precedent-setting decision, the court ruled that Ooki DAO is a “person” under the Commodity Exchange Act and can thus be held liable for violations of the law. The court then ruled that Ooki DAO had indeed violated the law in accordance with the charges.”
This case against Ooki DAO was unique as it was one of the first cases where a government agency pursued the DAO and its token holders.
Prior to this incident, there was a perception in the industry that DAOs and decentralized finance platforms were largely immune from regulatory scrutiny due to their decentralized nature.
Related: SEC Lawsuits Against Binance and Coinbase Bring Crypto Industry Together
However, the key issue is that the CFTC has alleged that Tom Bean and Kyle Kistner, the founders of Ooki DAO predecessor bZeroX, deliberately attempted to transfer ownership of their non-compliant Ooki DAO trading platform in order to avoid any potential legal resistance.
“The founders set up Ooki DAO with the evasive purpose and with the express purpose of operating an illegal trading platform without legal liability,” said Ian McGinley, Director of Enforcement at the CFTC, adding that:
“This decision should serve as a wake-up call to anyone who believes they can circumvent the law by adopting the DAO structure, intending to shield 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