Stop using DAO as a shield: CFTC sues Ooki DAO and wins, setting a precedent that DAOs must bear legal responsibility for their actions.

The cryptocurrency enterprise bZx created the bZx protocol, offering "decentralized margin trading" and "commodity trading markets." The protocol's governance was later transferred to Ooki DAO. However, according to the U.S. Commodity Futures Trading Commission (CFTC), DAOs cannot serve as a shield, and the court ruled that Ooki DAO is considered a "person" under the Commodity Exchange Act and is responsible for its illegal activities.

CFTC Lawsuit Against Ooki DAO Background

Previous reports have extensively covered the lawsuit against Ooki DAO by the CFTC:

CFTC Sues bZeroX, Ooki DAO: DAO Evades Regulation and Faces Penalty! CFTC Holds Members of Decentralized Autonomous Organization Ooki DAO Accountable, Community Criticizes Abuse of Power

Illegal Provision of OTC Trading, Unregistered Futures Broker, Lack of KYC

The CFTC pointed out that bZeroX company created the bZx protocol, which from June 1, 2019, to August 23, 2021, provided "decentralized margin trading" and "commodity trading market," involving illegal provision of OTC trading, being unregistered, and other violations. The founders of bZeroX, Tom Bean and Kyle Kistner, were aware and involved, and were fined $250,000.

bZx Protocol as a Puppet, Authority Transferred to Ooki DAO Formerly Known as bZx DAO

On August 23, 2021, bZeroX transferred the authority of the bZx protocol to bZx DAO, which was later renamed Ooki DAO.

The CFTC stated that the founders of bZeroX assured Ooki DAO members that this transfer of operation could resist enforcement-proof, allowing Ooki DAO to engage in illegal activities without facing penalties.

CFTC Ruling: bZeroX Founders Actively Involved in DAO, Responsible for Violations

The CFTC believes that the founders of bZeroX are still actively involved members of Ooki DAO and should be held responsible for the DAO's violations.

Subsequently, Ooki DAO members initiated voting on governance forums to consider allocating Ooki DAO funds, hiring legal advisors, seeking Gitcoin's legal defense fund, accepting donations to fund legal defense.

Ooki DAO Proposes Self-Rescue: All DAO Members are Accountable for Voting! After CFTC Accuses Ooki DAO of Violations, Members Seek Legal Support

CFTC Enforcement Victory, Ooki DAO Ordered to Pay

After nearly nine months, despite multiple amicus briefs submitted on behalf of Ooki arguing that DAO should not be seen as a single entity and the court should identify and summon relevant members of the DAO separately.

However, in the absence of Ooki DAO in the judgment and no further defense, the court deemed Ooki DAO as a "person" under the Commodity Exchange Act, thus holding it accountable for its illegal activities.

CFTC Enforcement Division Director Ian McGinley also announced the victory on the official website.

The ruling sets a precedent, with specific determinations including:

• Defendant Ooki DAO to pay a civil penalty of $643,542

• Ooki DAO prohibited from registering and providing trading services

• Third parties providing hosting and domain registration services for the Ooki DAO website must shut down the official website and remove related content from the internet.