Judge Fix DAO Token Holders Liability
A U.S. judge denied a motion to bZx DAO token holders as defendants in a class action lawsuit filed by some victims of the protocol’s $55 million hack from November 2021.
The Court’s ruling classified bZx DAO as a general partnership. It stated that the plaintiffs provided sufficient facts to qualify defendants who hold the DAO’s governance tokens as members of the general partnership. As such, they are plausibly liable for the group’s obligations, according to California partnership law.
bZx is a DeFi margin trading protocol. The platform’s creators transitioned the protocol to a DAO controlled by bZx DAO in August 2021. The court cited comments issued by the project team when transitioning to a DAO structure as grounds for its ruling.
At the time, the bZx protocol founders stated that the move to a DAO would insulate the project from regulatory issues. The Court also cited a conclusion by the U.S. Commodity Futures Trading Commission that bZx transitioned to a DAO to insulate the project from regulatory oversight and liability based on U.S. laws.
(With inputs from Shikha Singh)
You need to login in order to Like
