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Ooki DAO Misses Lawsuit Response Deadline, Default Judgment on the Cards

After the Ooki DAO failed to answer to the lawsuit by the deadline, the commodities regulator has began the process of obtaining a court judgement.

After missing the deadline to respond to the lawsuit, the Commodity Futures Trading Commission (CFTC) has commenced the process of obtaining a default judgement in its action against Ooki DAO.

According to a court filing on Jan. 11, the regulator has requested a “entry of default” against the decentralised autonomous organisation (DAO), claiming it missed the deadline to “respond or otherwise defend” as ordered by the summons.

If authorised, the entry of default establishes that Ooki DAO has failed to plead or defend itself in court and thus is no longer able to answer or respond to the claim.

An “entry of default” is the first stage in obtaining a default judgement – a court ruling issued when a defendant fails to defend a lawsuit.

The CFTC filed the lawsuit on September 22, 2022, accusing Ooki DAO of illegally offering “leveraged and margined” digital asset commodity transactions to retail traders, as well as failing to implement a method of identifying customers and “engaging in activities only registered futures commission merchants (FCM) can perform.”

The DAO was served with the lawsuit via its assistance chat box, as well as a notification on its online forum.

District Judge William Orrick ordered the CFTC to serve Tom Bean and Kyle Kistner, the founders of a previous trading platform to Ooki DAO, in December 2022, adding that the CFTC “shall serve at least one identified Token Holder if that is possible.”

Many criticised the regulator for filing the lawsuit without clear regulatory parameters. Summer Mersinger, CFTC commissioner, even dubbed the measure a “regulation by enforcement” strategy.

As allegations and enforcement will be conducted out against an organisational structure with no central body and often comprises anonymous individuals, the case could set an important precedent for future litigation involving DAOs.

Judge Orrick stated in a court filing on December 20, 2022 that Ooki DAO “has the power to be sued as an unincorporated association under state law,” but that this does not “necessarily demonstrate” that the DAO is an association that may be held responsible under commodities regulations.

He went on to say that those topics could be addressed “later in litigation.”

 

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