The Commodity Futures Trading Commission (CFTC) has an enforcement action against Ooki DAO filed, a crypto margin trading and lending platform for margin trading of digital assets that only CFTC-registered Futures Commission Merchants (FCM) can conduct.
Ooki DAO also failed to comply with the customer identification requirements prescribed by the Bank Secrecy Act, the Commission said allegedly in its lawsuit filed in the United States District Court for the Northern District of California.
CFTC files charges against Ooki DAO
“The CFTC is seeking restitution, disgorgement, civil penalties, trade and registration bans, and injunctions against further violations of the CEA and CFTC rules as charged,” the commission said in a statement Thursday.
The CFTC filed the same charges against Ooki DAO’s predecessor – bZeroX – and announced that Had had reached a $250,000 settlement with bZeroX and its founders Tom Bean and Kyle Kistner.
The agency accused Ooki of using its structure to circumvent regulatory oversight.
“A key goal of bZeroX in transferring control of the bZx protocol (now the Ooki protocol) to the bZx DAO (now the Ooki DAO) was to attempt to make the bZx DAO enforcement-proof due to its decentralized nature . Simply put, the bZx founders believed they had found a way without breaking the law and regulations and other laws without consequences.”
With the aim of protecting customers
Gretchen, acting director of enforcement, said these measures are designed to protect US customers.
“Margin, leveraged, or funded trading in digital assets offered to retail clients in the United States must be conducted on duly registered and regulated exchanges in accordance with all applicable laws and regulations. These requirements apply equally to companies with more traditional business structures as well as DAOs,” he added.
However, Commissioner Summer Mersinger dismissed the lawsuit, saying“We cannot arbitrarily decide who is responsible for these violations based on an unsupported legal theory that amounts to regulation through enforcement as federal and state policies evolve.”
Contradicts the basic principles of DeFi
Experts believe that the CFTC’s actions run counter to the principles of decentralized finance. It suggests that a DAO is no different from a traditionally regulated institution in terms of legal responsibilities. “DAOs are not immune from enforcement and may not violate the law with impunity,” the CFTC said in its court filing.
It is the first case in which a decentralized autonomous organization has been sued by the Commission. It is also an indictment against the token holders who participated in the protocol’s governance process.
Source: Crypto News Deutsch