The Commodity Futures Trading Commission (CFTC) can serve a decentralized autonomous organization (DAO) through a website help bot and forum post, a federal court ruled Monday.
The CFTC appropriately served Ooki DAO, which it alleges offers illegal leveraged and margined trades without a Futures Commission Merchant designation or know-your-customer program, on Sept. 22, 2022, the District Court for the Northern District of California further ruled. The DAO has three weeks to respond from that date, meaning if no one responds by Oct. 13, the CFTC could win a default judgement.
The ruling came the same day a group of crypto lawyers and developers filed to join the CFTC's case against Ooki DAO, claiming the regulator's efforts to hold the DAO's members individually liable is denying them the ability to respond.
LeXpunK, a collective group of lawyers and developers active in the crypto sector, asked a federal judge for permission to join the Ooki DAO case as a friend of the court, or amicus curiae, according to a filing also made Monday.
"LeXpunK has an interest in this case and can provide the Court with important additional information and perspective with respect to the novel facts at issue here, in a case of first impression dealing with liability for participation in a so-called Decentralized Autonomous Organization or DAO," the filing said.
Stephen Palley and Samuel Moniz of Brown Rudnick LLP and Alex Golubitsky of Alex Golubitsky PLLC jointly filed the motion on Monday. According to the court docket, no attorney has filed to join the case to defend Ooki DAO or any of its members.
The CFTC sued Ooki DAO last month on allegations that, as an unincorporated association, it violated federal laws around offering leveraged and margined trading products by refusing to register as a Futures Commission Merchant (FCM) and by not having a know-your-customer (KYC) program.
Controversially, the CFTC said it intended to hold any voting member of the DAO individually liable, and filed for permission to serve the DAO's members by posting the complaint on Ooki's website and in a help chat bot, the motion the court ruled on Monday.
The lack of individual service is one area LeXpunK took issue with, arguing the regulator "failed to take adequate steps" to properly serve the defendants.
"The CFTC should be required to take additional steps to provide notice of this Complaint to the person[s] it alleges have violated the Commodity Exchange Act (CEA). Service by posting on a website, without any additional effort, falls far short of what the Constitution requires," the filing said.
UPDATE (Oct. 3, 2022, 22:55 UTC): Adds minor edits throughout.