Ooki DAO, the decentralized autonomous organization (DAO), is set to cease its operations following an unprecedented court battle with the Commodity Futures Trading Commission (CFTC). Recently, a United States district judge issued a default judgment order that mandates the permanent shutdown of Ooki DAO and imposes a civil monetary penalty of $643,542.
The CFTC initially lodged a lawsuit against Ooki DAO in September 2022, alleging the organization’s unlawful provision of retail margin and leverage trading services, as well as its unregulated activities as a futures commission merchant. Ooki DAO’s failure to respond to the lawsuit by the January 2023 deadline paved the way for the default judgment.
Officially sanctioned on June 9, the order prompted the CFTC to hail the lawsuit as a resounding victory and provide a comprehensive overview of the default judgment’s ramifications. Per the CFTC’s statement, Ooki DAO faces permanent trading and registration bans. Additionally, the organization must dismantle its website and erase all of its online content.
Notably, the court’s decision carries significant weight due to its precedent-setting nature. By categorizing Ooki DAO as a “person” under the Commodity Exchange Act, the court establishes the organization’s liability for violations of the law. Consequently, the court concluded that Ooki DAO did, indeed, commit the alleged infractions.
This case against Ooki DAO stands out as a distinctive instance where a government agency took legal action against a DAO and its tokenholders. Prior to this lawsuit, the prevailing assumption within the industry was that DAOs and decentralized finance platforms largely enjoyed protection from regulatory scrutiny due to their decentralized structure.
However, the CFTC’s allegations revolve around the intentional transfer of ownership of the noncompliant trading platform from Tom Bean and Kyle Kistner, the founders of Ooki DAO’s predecessor bZeroX, to Ooki DAO. It is believed that this maneuver was an attempt to evade potential legal consequences.
The CFTC’s director of enforcement, Ian McGinley, emphasized the founders’ dubious intentions, stating that they established Ooki DAO with the explicit aim of operating an illicit trading platform without being held accountable by the law. He further asserted that this landmark decision should serve as a wake-up call to individuals who seek to exploit the DAO structure to evade legal enforcement and jeopardize public welfare.