CFTC and crypto lawyers duke it out over service in the Ooki DAO case

CFTC and crypto lawyers duke it out over service in the Ooki DAO case
  • The CFTC has been permitted to serve legal documents on Ooki DAO’s users, but a federal court in San Francisco is now rethinking its choice.

How do you sue a DAO? The question was at the heart of the Commodity Futures Trading Commission’s case against the Ooki DAO, a decentralized autonomous organization that the agency says only feigned decentralization to facilitate commodity violations. Controversially, the CFTC distributed legal services to DAO users through the DAO chat box. Most court cases require physical service, but the CFTC turned on the court in October with a special waiver, as it did. DeFi advocates reacted heatedly.

A San Francisco court heard virtual arguments over the notification mechanism on Wednesday night. Arguing with CFTC attorneys were not Ooki DAO’s attorneys. Ooki DAO has yet to respond to the lawsuit coherently, such as enlisting an attorney to represent him in the case. Its architects, Tom Bean and Kyle Kistner did just that. The CFTC settled with them in September.

Instead, four attorneys recruited from outside crypto firms and allies a16z, LeXpunK, Paradigm, and the DeFi Education Fund argued using CFTC methods. All four had filed amici curiae briefs in the case in the US District Court for the Northern District of California. “We have some cool technology,” said Stephen Palley, LeXpunK board representative. “But you still have to accept the concept of due process.

Ooki’s previous supporters did not deny that the platform was used to facilitate illegal trade. Instead, they argued that the mechanism of the service is to target everyone who has ever used the platform. “Because the stakes are so high and the novelty of the case, which we have all recognized here, we think it is even more important that the government be called upon to reverse the service here,” said James McDonald, who represents the DeFi advocacy group Education Fund. For his part, Judge William Orrick would not allow Ooki DAO’s decentralization to relieve him of legal service, a hot topic in other active court cases. “It appears to me that the CFTC is suing a company, not a technology,” Orrick said, continuing, “It appears to me that Ooki DAO is an unincorporated association under California law.”

CFTC officials noted that they do not have to prove that each member of the organization they serve is criminally responsible for serving them collectively. “As long as we can show that the association exists, that is enough to trigger the service requirements that we have been relying on,” said Anthony Biagioli, trial attorney for the CFTC. Orrick must now decide whether to continue his earlier request for service as cryptocurrency proponents want or allow the CFTC to proceed. “I’ll get an assignment fairly soon, I hope,” he concluded.

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