Ooki DAO To Shut Down After 'precedent Setting' Court Battle With CFTC

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A U.S. District Judge has issued a default judgment order against decentralized organization Ooki DAO seeking permanent closure and payment of $643,542 in civil penalties.

Today, CFTC Enforcement Director Ian McGinley released a statement regarding the victory in the Ooki DAO case. learn more: https://t.co/MInNeKLeH5

— CFTC (@CFTC) June 9, 2023

The Commodity Futures Trading Commission originally filed a lawsuit against the Ooki DAO in September 2022, accusing the DAO of illegally providing retail margin and leverage trading services and “acting illegally” as a futures commission broker.

A de facto default judgment has been looming for months since the Ooki DAO missed a January deadline to respond to a lawsuit.

The order became formal on June 9, and the CFTC liberated A statement that day outlined the full scope of the default judgment and described the case as a “landslide victory.”

The Ooki DAO has received a “permanent ban on trading and registration” and has been ordered to shut down the Ooki DAO website and “remove its content from the internet” from now on.

“Importantly, in a precedent decision, the court held that the Ooki DAO was a ‘person’ under the Commodity Exchange Act and could therefore be held liable for violations of the law. The court then ruled that the Ooki DAO had violated the law against which he was actually prosecuted. ”

This lawsuit against the Ooki DAO was unique as it was one of the first cases in which a government agency pursued the DAO and its token holders.

Prior to this lawsuit, there was a belief within the industry that DAOs and decentralized financial platforms were largely shielded from regulatory scrutiny due to their decentralized nature.

Related: SEC Lawsuit Against Binance And Coinbase Unites Crypto Industry

The key issue, however, is that Tom Bean and Kyle Kisner, founders of Ooki DAO’s predecessor bZeroX, deliberately opted for a non-compliant trading platform to avoid potential legal resistance. The CFTC alleged that it attempted to transfer ownership to the Ooki DAO.

“The founders created the Ooki DAO for evasive purposes, with the express purpose of operating an illicit trading platform without liability,” said Ian McGinley, director of the CFTC Law Enforcement Division. noted and added:

“This decision should serve as a wake-up call to those who believe that adopting a DAO structure will protect them from law enforcement and circumvent the law with the intention of ultimately putting the public at risk. ”

Here on Oki, the court ruled that state law applies to these proceedings and that the DAO could be sued as a California unincorporated entity by the CFTC in a federal lawsuit under California law. The law establishes “mutual consent” to form associations simply by holding DAO tokens (!) pic.twitter.com/OR9fOPh2dT

— Ross (@z0r0zzz) June 9, 2023