An early complaint was submitted to the DAO via 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 notified by the Commodities Future Trading Commission (CFTC), according to an order issued by a United States federal court (DAO). On December 12, 2018, U.S. District Judge William Orrick issued an order ordering the United States regulator to serve the founders of decentralized trading platform bZeroX, Tom Bean and Kyle Kistner. bZeroX was the ancestor of the platform, while Ooki DAO was its successor. While Bean and Kistner had already settled charges with the CFTC in September in connection with illegal commodity offerings on bZeroX, separate charges were filed against Ooki DAO token holders. These charges were reported via a support chat box as well as a notice on their online forum. Bean and Kistner had already settled charges with the CFTC in September related to illegal commodity offerings on bZeroX.
However, when Judge Orrick eventually discovered that Bean and Kistner were also holders of Ooki DAO tokens, he reconsidered how the CFTC was to be notified in the litigation.
Judge Orrick said in his written opinion that “it is evident in this case that the Ooki DAO had genuine notice of the action.” However, in order to give the best notice that can reasonably be expected, the CFTC should notify at least one identified Token Holder if practicable.
On December 7, the U.S. District Court for the Northern District of California held a hearing with the CFTC and amicus briefing entities in an effort to convince Judge Orrick to reconsider allowing the CFTC to serve Ooki DAO through your help chat box. The hearing was attended by the CFTC and the entities that submitted the amicus briefs.
“The CFTC stated that it was aware that some of the Ooki DAO 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 was aware that some of the Ooki DAO token holders reside and conduct business in the United States.
“I had no prior knowledge of this,” he went on to say. It is said that “neither the lawsuit nor the CFTC’s Alternative Service Motion disclose 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 holders of Ooki DAO tokens.”
The Commodity Futures Trading Commission (CFTC) settled Sept. 22 with Bean and Kistner over allegations that they “illegally offered leveraged and margined retail commodity trading in digital assets.” via bZeroX.
Simultaneously, he filed a complaint against Ooki DAO, stating that once bZeroX was transferred into his hands, Ooki DAO was operating the same software as bZeroX, violating “the same laws as defendants.” This action was filed at the same time.
Some of the CFTC’s own employees were even among those who harshly criticized the agency for filing the action without first establishing clear regulatory principles. CFTC Commissioner Summer Mersinger referred to this approach as “regulation by enforcement.”