Ooki DAO is being sued by the Commodity Futures Trading Commission, (CFTC). Ooki DAO allows digital asset margin trading. Only Futures Commission Merchants (FCM), registered with the CFTC, can engage in this kind of trading.
Ooki DAO also failed comply with customer identification requirements under the Bank Secrecy act, as the commission further claimed in its lawsuit in the U.S. District Court for Northern California.
CFTC Files Charges Against Ooki DAO
“The CFTC seeks restitution and disgorgement as well as civil monetary penalties, trading bans and injunctions to prevent further violations of the CEA or CFTC regulations,” the Commission stated in a statement Thursday.
Ooki DAO’s predecessor – bZeroX – was also charged by the CFTC. The CFTC disclosed that Ooki DAO had reached a $250,000 settlement agreement with bZeroX as well as its founders Tom Bean and Kyle Kistner.
Ooki was accused by the agency of using its structure in order to avoid regulatory oversight.
“BZeroX’s main objective was to make the bZx DAO, due to its decentralized nature, enforce-proof. Simply put, the founders of bZx believed that they had found a way to violate the Act and Regulations as well as other laws without any consequences.
Protection of Customers
Gretchen, Acting Director of Enforcement, stated that these actions are intended to protect US customers.
“Margined or leveraged digital asset trading must be offered to U.S. retail customers on properly registered and regulated platforms in compliance with all applicable laws. He added that these requirements also apply to DAOs as well as entities with traditional business structures.
Summer Mersinger, however, opposed the action. She stated, “We can’t arbitrarily determine who is responsible for those violations based upon an unsupported legal theory amounting regulation by enforcement while federal or state policy is being developed.”
Contra to DeFi’s Fundamental Principles
Experts think the CFTC’s actions are contrary to decentralized finance principles. This suggests that a DAO does not have the same legal responsibilities as a traditional regulated institution. The court filing stated that DAOs “are not immune to enforcement and may not violate law with impunity.”
This is the first time that a decentralized autonomous organisation has been sued by a Commission. It also indicts token holders who took part in the protocol’s governance.
Vitalik Buterin, the Ethereum founder, posted a blog Monday in which he defended DAOs. He said that they could be more effective than traditional corporations or nation-states in meeting certain market needs.
NFT lending platform BendDAO, which had lent nearly 15000 Ethereum, was struck by insolvency last month.
The first CryptoPotato article was titled CFTC Lawsuit Against Ooki, $250,000 Settlement with bZx Creates new Precedents
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