Some Considerations Regarding the Legal Situations of Other DAOs
For bZeroX and Ooki DAO
bZeroX was a leveraged trading platform. The protocol was compromised when its creators were phished, allowing hackers to drain its funds. In response, the creators launched a successor protocol, Ooki, and issued debt tokens to affected bZeroX users. However, many users found this remedy insufficient and pursued legal action.
During the court proceedings, it was noted that token holders could be considered part of a general partnership. However, no final determination on liability was made, and the case was eventually mutually dismissed.
Despite this, the CFTC imposed penalties on bZeroX, LLC and its founders for illegally offering leveraged and margined retail commodity transactions involving digital assets. The agency also pursued action against Ooki DAO, which the court recognized as a legal entity capable of being sued. Notably, the court did not assign liability to any individual DAO member. It’s also worth mentioning that Ooki DAO never formally responded to the case and only geo-blocked U.S. users after legal action was initiated.
BarnBridge DAO
In the BarnBridge case, the DAO offered bond-like products, prompting SEC action for offering unregistered securities. There was no apparent effort to prevent U.S. citizens from purchasing these products. The SEC did not classify the DAO itself as the issuer; instead, it focused on the investment pool in question.
As a result, the question of liability became ambiguous. Could it fall on token holders, those who voted on the pool, the developers, the deployers, or the founders? Ultimately, both founders agreed to pay fines to settle the matter.
Samuels v. Lido DAO
In this case, Samuels purchased Lido tokens, which he later sold at a loss. He sued Lido DAO, alleging it had offered unregistered securities. The court found that Lido’s largest investors could be considered part of a general partnership. However, it ruled that Samuels himself, as a simple token holder, was not a partner. Still, the court left open the possibility that further discovery could reveal facts supporting such a relationship.
Samuels is currently pursuing legal action against the large venture capital firms involved with Lido, accusing them of soliciting unregistered securities.
From what I can see, there are three core elements to consider: Classification, Jurisdiction, and Liability.
Classification:
bZeroX and Ooki were classified as offering illegal leveraged/margined commodity trades.
BarnBridge was seen as offering unregistered securities.
In Lido’s case, the tokens were argued to be securities, and the DAO structure was scrutinized as a potential general partnership.
Jurisdiction:
The CFTC and SEC have asserted jurisdiction over DAOs when their activities fall under the agencies’ regulatory authority.
All cases emphasized the importance of conducting activities involving the U.S. or sufficiently preventing U.S. citizens from participating.
Liability:
In Ooki, while the DAO was sued, no individual was held personally liable.
In BarnBridge, the founders assumed liability.
In Lido, plaintiffs consider that venture capital investors could be liable due to their activities within the DAO.
https://www.courtlistener.com/docket/63281750/sarcuni-v-bzx-dao/
https://www.courtlistener.com/docket/65369411/commodity-futures-trading-commission-v-ooki-dao/
https://www.courtlistener.com/docket/68095676/samuels-v-lido-dao/