A US district judge has issued a default judgment ordering Ooki DAO to permanently shut down and pay a $643,542 civil penalty. The Commodity Futures Trading Commission (CFTC) originally filed a lawsuit against Ooki DAO in September 2022, accusing the decentralized autonomous organization (DAO) of illegally providing retail margin and leveraged trading services and “unlawfully acting” as a futures commission merchant.
The default judgment has been in place for months after Ooki DAO missed a January 2023 deadline to respond to the lawsuit. The order went into effect on June 9, the day the CFTC issued a statement calling the lawsuit a "landslide victory" and outlining the full scope of the default judgment.
Ooki DAO has received a "permanent trading and registration ban;" the commission said it had been ordered to shut down the Ooki DAO website and "remove its content from the Internet," adding: "Crucially, in a preceding-setting decision, the Court ruled that Ooki DAO was a 'person' under the Commodity Exchange Act and therefore liable for violations. The Court then held that Ooki DAO had in fact violated the alleged law." This case against Ooki DAO is unique and marks the first time a government agency has gone after a DAO and its token holders.
Prior to this case, it was widely believed in the industry that DAOs and decentralized finance platforms were mostly exempt from regulatory scrutiny due to their decentralized nature. A key issue, however, is the CFTC's claim that the founders of Ooki DAO's predecessor, bZeroX , Tom Bean and Kyle Kistner, deliberately attempted to transfer ownership of their non-compliant trading platform to Ooki DAO to avoid any potential legal headwinds.
“The founders created Ooki DAO out of evasion with the express goal of operating an illegal trading platform without legal liability,” noted CFTC Executive Director Ian McGinley, adding: “This decision should serve as a wake-up call to anyone who thinks they can circumvent the law by adopting a DAO structure, intending to shield themselves from law enforcement and ultimately put the public at risk.”
