A federal judge has sided with the U.S. Commodity Futures Trading Commission (CFTC) in a lawsuit alleging decentralized autonomous organization (DAO) Ooki DAO offered unregistered commodities, quashing an industry-wide perception that decentralized finance (DeFi) actors are immune to regulatory scrutiny.
U.S. District Judge William H. Orrick ruled on Thursday that Ooki DAO operated an illegal trading platform and unlawfully acted as an unregistered futures commission merchant (FCM), granting the CFTC a default judgment. He ordered the organization to pay $643,542 in penalty, to permanently cease its operations and shut down its website.
The original lawsuit, filed in the U.S. District Court for the Northern District of California last September, alleged the DAO offered "leveraged and margined" commodities transactions to retail customers and neglected to observe know-your-consumer laws while serving those traders.
In January, the CFTC requested a federal judge go ahead with a ruling that the DAO violated federal commodities laws after the DAO missed a deadline to respond to the lawsuit. A judge dismissed the request, however.
While Ooki DAO never formally responded to – or even acknowledged – the lawsuit, it did geofence the U.S. after the suit was filed.
Players in the decentralized finance (DeFI) space have long evaded the legal scrutiny faced by their centralized counterparts, but that could be changing. In March, a California court ruled bZx protocol and its token-holding community members' were liable for losses resulting from an exploit that drained their DAO's treasury. And, in April, the Securities Exchange Commission (SEC) subpoenaed SushiSwap Head Chef Jared Grey.
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