The Commodity Futures Trading Commission (CFTC) has requested that a federal judge impose a default judgement against Ooki DAO after it failed to respond to a lawsuit that alleged it violated federal commodities laws.
Ooki DAO — formerly known as bZeroX — is a decentralized crypto lending and borrowing protocol that offers users margin trading through loaned funds in order to increase trading exposure.
The group was sued by the commission on September 22, 2022, for:
- Offering unlawful leveraged and margined commodity transactions,
- engaging in activities without registering with the CFTC as a Futures Commission Merchant,
- failing to have appropriate KYC and anti-money laundering procedures.
However, as detailed in Wednesday’s filings, Ooki DAO failed to respond to the lawsuit before the January 10, 2023 deadline. As a result, the commission has asked the judge to rule in its favor.
The case proved to be particularly complicated with various legal experts arguing that a DAO can’t be treated as a single person. Instead, they reasoned that the CFTC should be required to serve the individual token holders behind the DAO.
Lawyers described how OOKI token holders may be found individually liable within the collective entity, while one CFTC commissioner claimed the lawsuit “unfairly picks winners and losers, and undermines the public interest by disincentivizing good governance in this new crypto environment.”