Landmark Court Battle Forces Ooki DAO to Permanently Cease Operations and Pay Hefty Penalty
After a significant legal clash with the Commodity Futures Trading Commission (CFTC), Ooki DAO has been handed a default judgment order by a United States district judge. The order mandates the immediate shutdown of Ooki DAO and imposes a substantial civil monetary penalty amounting to $643,542.
The CFTC had initially filed a lawsuit against Ooki DAO in September 2022, alleging the decentralized autonomous organization’s involvement in illicit activities such as offering retail margin and leverage trading services, as well as functioning as an unauthorized futures commission merchant.
Months of anticipation led to the issuance of the default judgment, as Ooki DAO failed to respond to the lawsuit by the January 2023 deadline.
With the court order now in effect as of June 9, the CFTC wasted no time in proclaiming their victory, emphasizing the wide-ranging implications of the default judgment.
In the aftermath of the court’s decision, Ooki DAO faces permanent trading and registration bans. The organization is also compelled to dismantle its website and erase all its content from the Internet, as mandated by the commission.
Significantly, the court’s ruling establishes a precedent by determining that Ooki DAO qualifies as a “person” under the Commodity Exchange Act, rendering it liable for violations of the law. The court unequivocally declared that Ooki DAO indeed breached the law as charged.
This high-profile case sets a groundbreaking precedent, representing one of the initial instances in which a government agency has taken legal action against a DAO and its tokenholders.
Prior to this lawsuit, the prevailing belief within the industry was that DAOs and decentralized finance platforms largely enjoyed protection from regulatory scrutiny due to their decentralized nature.
However, a crucial factor in this case is the CFTC’s contention that Tom Bean and Kyle Kistner, the founders of Ooki DAO’s precursor bZeroX, intentionally transferred ownership of their noncompliant trading platform to Ooki DAO as a deliberate attempt to evade potential legal repercussions.
CFTC Division of Enforcement Director Ian McGinley highlighted, “The founders created the Ooki DAO with an evasive purpose, and with the explicit goal of operating an illegal trading platform without legal accountability.” He further emphasized that this ruling should serve as a wake-up call for anyone attempting to circumvent the law through the adoption of a DAO structure, as it poses risks to public safety and undermines the enforcement efforts of regulatory agencies.
This legal outcome undoubtedly leaves a lasting impact on the regulatory landscape surrounding decentralized autonomous organizations, raising questions about the accountability and compliance of similar entities in the future.