CFTC Sues a DAO for the First Time

by in Cryptocurrency News

CFTC DAO crypto

The US derivatives markets regulator CFTC (Commodity and Futures Trading Commission) filed a lawsuit against the Decentralized Autonomous Organization bZeroX and its founders Tom Bean and Kyle Kistner. CFTC claims that the DAO has facilitated margined and leveraged retail commodity transactions, which they say didn't comply with law.

Related: CFTC Chair Revealed Creating a New Crypto Regulation Office

According to the official release, the financial regulator imposed a $250,000 penalty against bZeroX for offering digital asset trading, and violating the law. CFTC also seeks disgorgement, trading and registration bans against the DAO. The order by CFTC finds that from around June 1, 2019 to August 23, 2021 the bZeroX DAO operated through blockchain-based protocol and offered users margined and leveraged retail commodity transactions (functioning like a trading platform) illegally.

In August 2021, bZeroX transferred control of the protocol to the bZx DAO, which continued to operate under the name Ooki DAO. CFTC says the platform continued to violate the law operating in the exact same manner as bZeroX. The regulator's order says bZeroX founders were active members of the DAO and are liable for Ooki DAO’s violations.

Chairman Rostin Behnam said that the agency will continue to pursue individuals and their operations who intend to avoid regulatory oversight. Acting Director of Enforcement Gretchen Lowe noted that the actions are part of the CFTC’s broader efforts to protect U.S. customers in a rapidly growing DeFi environment.