Judge orders CFTC to sue Ooki DAO creators
An early complaint was served to the DAO using a support chat box; However, a federal court later ruled that the regulator “shall serve at least one identified token holder.” A lawsuit against the two original creators of the decentralized autonomous organization Ooki must be served on them by the Commodities Future Trading Commission (CFTC), according to an order issued by a US federal court (DAO). On December 12, 2018, District Judge William Orrick issued an order ordering the US regulator to serve decentralized trading platform bZeroX’s founders, Tom Bean and Kyle Kistner. bZeroX was the platform’s progenitor, while Ooki DAO was its successor. While Bean and Kistner had already settled charges with the CFTC in September related to illegal commodity offerings on bZeroX, separate charges were brought against holders of Ooki DAO tokens. These costs were served using a help chat box as well as a message on the online forum. Bean and Kistner had already settled charges with the CFTC in September related to illegal commodity offers on bZeroX.
But when it was eventually found by Judge Orrick that Bean and Kistner were also holders of Ooki DAO tokens, he rethought how the CFTC would be served in the lawsuit.
Judge Orrick said in his written opinion that “it is clear in this case that Ooki DAO had genuine notice of the act.” “However, to provide the best notice that can reasonably be expected, the CFTC should serve at least one identified token holder if at all possible.
On December 7, the District Court for the Northern District of California held a hearing with the CFTC and those entities that submitted amicus briefs in an attempt to convince Judge Orrick to reconsider allowing the CFTC to operate the Ooki DAO through its help chat box. The hearing was attended by the CFTC and the entities that submitted the amicus briefs.
“The CFTC asserted that it knew that some of Ooki DAO’s token holders reside and conduct business in the United States,” Orrick wrote. “This is because the two founders of Ooki DAO’s predecessor entity, bZeroX LLC, are token holders residing in the United States.” “At the hearing, the CFTC asserted that it knew that some of Ooki DAO’s token holders reside and conduct business in the United States
“I had no prior knowledge of this,” he went on to say. It says that “Neither the lawsuit nor the CFTC’s Motion for Alternative Service discloses that the former founders, [Bean and Kistner]are or have been token holders.” After all was said and done, he concluded that “the CFTC is now ORDERED to serve Bean and Kistner, in their capacity as Ooki DAO token holders.”
The Commodities Futures Trading Commission (CFTC) reached a settlement on September 22 with Bean and Kistner over allegations that they “unlawfully offered leveraged and margined retail digital asset commodity trading” via bZeroX.
At the same time, it filed a complaint against Ooki DAO, saying that when bZeroX was transferred into its hands, Ooki DAO operated the same software as bZeroX, which violated “the same laws as the respondents.” This action was brought at the same time.
Even some of the CFTC’s own employees were among those who harshly criticized the agency for filing the lawsuit without first establishing clear regulatory principles. CFTC Commissioner Summer Mersinger referred to this method as “regulation by enforcement.”
