Last week, according to a press release, the U.S. Commodity Futures Trading Commission (CFTC) "issued an order simultaneously filing and settling charges" against a decentralized autonomous organization (DAO). In the press release the CFTC announced that it had issued and settled charges against bZeroX LLC and its two founders and simultaneously filed an enforcement action against the Ooki DAO, as successor to bZeroX. The CFTC alleges that bZeroX and the Ooki DAO violated the Commodity Exchange Act and CFTC regulations by operating as an unregistered futures commission merchant, failing to implement a customer identification program as required by the Bank Secrecy Act, and illegally offering leveraged and margined retail commodity transactions.
The CFTC complaint alleges that the Ooki DAO is an unincorporated association that became the successor to bZeroX when the founders transferred control of the bZx protocol to the DAO. According to the CFTC, this transfer was a deliberate attempt to insulate the protocol from regulators and become "enforcement-proof." Due to the pseudonymous membership of the DAO, the CFTC reportedly served the Ooki DAO by posting the complaint on an online discussion forum for DAO members and simultaneously submitting the complaint to the help chatbot on the DAO's website.
In another recent enforcement action, the U.S. Securities and Exchange Commission (SEC) announced charges against Hydrogen Technology Corp., its former CEO and the CEO of market maker Moonwalkers Trading Limited for allegedly perpetrating a scheme to manipulate the trading volume and price of the Hydro token, which the SEC characterized as an unregistered "crypto asset security." In addition to the defendants' offering the Hydro token through "direct sales on crypto asset trading platforms," the complaint alleges that they distributed Hydro through employee compensation, bounty programs that awarded Hydro to individuals who promoted the token, and "airdrops" that gave Hydro to users for free. According to the SEC, Hydrogen hired Moonwalkers to use bots to artificially inflate the Hydro token price and made more than $2 million in profits as a result. "Companies cannot avoid the federal securities laws by structuring the unregistered offers and sales of their securities as bounties, compensation, or other such methods," said Carolyn M. Welshhans, associate director of the SEC's Enforcement Division, in a press release accompanying the filing.
For more information, please refer to the following links:
- CFTC Imposes $250,000 Penalty Against bZeroX, LLC and Its Founders and Charges Successor Ooki DAO for Offering Illegal, Off-Exchange Digital-Asset Trading, Registration Violations, and Failing to Comply with Bank Secrecy Act
- The CFTC Served Ooki DAO Papers By Posting Them in an Online Discussion Forum
- SEC Charges The Hydrogen Technology Corp. and its Former CEO for Market Manipulation of Crypto Asset Securities
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