A Groundbreaking Judgment Against Ooki DAO
A United States district judge has issued a default judgment order necessitating Ooki DAO to permanently cease operations and pay a civil monetary penalty of $643,542. The Commodity Futures Trading Commission (CFTC) originally filed a lawsuit against Ooki DAO in September 2022, charging the decentralized autonomous organization (DAO) with illegally offering retail margin and leverage trading services, and with “unlawfully acting” as a futures commission merchant.
Ooki DAO Missed the Deadline to Respond
The likelihood of a default judgment had been building for months after Ooki DAO missed the January 2023 deadline to respond to the lawsuit. Now that the order has become official as of June 9, the CFTC released a statement the same day describing the lawsuit as a “sweeping victory” and elaborating the full extent of the default judgment.
Unprecedented Verdict: DAOs as ‘Persons’
The ruling signifies a remarkable shift in regulatory precedent. As the CFTC stated, “Critically, in a precedent-setting decision, the court held that the Ooki DAO is a ‘person’ under the Commodity Exchange Act and thus can be held liable for violations of the law. The court then held that the Ooki DAO did, in fact, violate the law as charged.”
Ooki DAO’s Unique Case: A Warning for DAOs and Tokenholders
The lawsuit against Ooki DAO marked one of the first instances a government agency targeted a DAO and its token holders. Until this case, the general consensus among industry participants was that DAOs and decentralized finance platforms were largely insulated from regulatory oversight due to their decentralized nature.
The Accusation: Evasive Intentions to Dodge Legal Accountability
However, a major point of contention in this case was the allegation that Tom Bean and Kyle Kistner, founders of Ooki DAO’s predecessor bZeroX, had deliberately tried to transfer ownership of their non-compliant trading platform to the Ooki DAO to avoid potential legal repercussions.
“The founders created the Ooki DAO with an evasive purpose, and with the explicit goal of operating an illegal trading platform without legal accountability,” stated Ian McGinley, CFTC division of enforcement director, adding:
“This decision should serve as a wake-up call to anyone who believes they can circumvent the law by adopting a DAO structure, intending to insulate themselves from law enforcement and ultimately putting the public at risk.”