CFTC Secures Default Judgment Against Ooki DAO

CFTC Secures Default Judgment Against Ooki DAO

A default judgment order has been issued by a United States district judge, mandating Ooki DAO to cease operations permanently and pay a civil monetary penalty amounting to $643,542.



In September 2022, the Commodity Futures Trading Commission (CFTC) filed a lawsuit against Ooki DAO, alleging the illegal provision of retail margin and leverage trading services, as well as engaging in activities of a futures commission merchant without authorization. As Ooki DAO failed to respond to the lawsuit by the January 2023 deadline, a default judgment was imminent for months.

Following the official order on June 9, the Commodity Futures Trading Commission (CFTC) issued a statement describing the lawsuit against Ooki DAO as a "sweeping victory." The default judgment entails permanent trading and registration bans for Ooki DAO. 

Additionally, the DAO has been directed to shut down its website and remove all content from the Internet. The CFTC highlighted the significance of the court's decision, noting that it established Ooki DAO as a "person" under the Commodity Exchange Act, making it liable for the violations alleged. The court further determined that Ooki DAO did indeed contravene the law as charged.

The case against Ooki DAO was unprecedented as it represented one of the initial instances in which a government agency took action against a DAO and its tokenholders. Prior to this case, there was a prevailing belief among industry participants that DAOs and decentralized finance platforms enjoyed a certain level of protection from regulatory scrutiny due to their decentralized nature.

One important aspect of the case is the CFTC's accusation that Tom Bean and Kyle Kistner, the founders of Ooki DAO's predecessor bZeroX, deliberately sought to transfer ownership of their noncompliant trading platform to Ooki DAO in an attempt to evade potential legal consequences. This alleged action raises concerns about their intentions and highlights a potential motive for the transfer of the platform to the DAO.

Ian McGinley, the director of the CFTC division of enforcement, emphasized that the founders of Ooki DAO had intentionally established the DAO with the aim of operating an illegal trading platform without facing legal consequences. 

He described this decision as a warning to those who believe they can evade the law by adopting a DAO structure, emphasizing the potential risks it poses to the public. McGinley's statement underlines the CFTC's determination to hold accountable those who engage in unlawful activities through decentralized autonomous organizations.


 

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