How Do You Sue A DAO?
from the who-do-you-sue? dept
Decentralized Autonomous Organizations (DAOs) are one of the most fascinating things to emerge from the crypto space. While everyone was going crazy over NFTs, almost all of the more interesting things were happening in the DAO space. DAOs are something of an experiment in being able to form new kinds of organizations quickly in non-traditional ways. It’s not a corporation. It’s a much more amorphous digital setup to bring together a group of people to work towards a common goal, often (but not always) involving some tokenization and voting power.
Of course, as with any such thing, some very silly things may happen by people confused about how things work. But, there are many (less high profile) DAOs that are showing how these vehicles can be useful in bringing a group of interested people together to accomplish something.
But, then, of course, there are the legal questions. A few weeks ago the Commodity Futures Trading Commission (CFTC) filed a lawsuit against Ooki DAO. In theory, the Ooki DAO was decided to allow members to make leveraged trades on digital assets. The lawsuit alleges that the Ooki DAO violated commodity trading laws, as well as failing to abide by know your customer (KYC) laws for financial products. But… that’s left open a big question: just how exactly does one sue an amorphous blob of people who have come together for this purpose?
And, for starters, how does one serve a lawsuit on a DAO?
The CFTC asked the court to accept a somewhat unique form of service: posting the lawsuit to a “help chat bot” on the Ooki DAO website, and then posting a copy to Ooki DAO’s public forums.
By choosing to organize itself as a DAO, the Ooki DAO has structured its business in a way that has erected significant obstacles to traditional service of process. The Ooki DAO has no headquarters or physical office location; no mailing address; does not appear to be registered in any jurisdiction; and does not have a listed president, secretary, treasurer, or agent appointed to accept service….
Instead, it is a completely decentralized unincorporated association of anonymous individual Ooki Token holders who have voted those tokens to participate in the business of operating the Ooki Protocol. The Ooki DAO offers a website to access the Ooki Protocol (ooki.com). Through that website, users may submit comments or requests for assistance through a Help Chat Box linked through the website. Separately, the website links to an Online Forum for Ooki Token holders to discuss and vote on Ooki DAO governance issues (forum.ooki.com)….
[….]
In addition, on the same date it filed the Complaint, the Commission provided copies of the summons, complaint, and additional related papers to the Ooki DAO via the Ooki DAO’s Help Chat Box (through a submission with attachments via the Help Chat Box); and further provided notice of the action via the Ooki DAO’s Online Forum (which does not permit the posting of attachments). In addition, the day after serving the summons, complaint, and certain additional related papers, the Commission served additional related papers on the Ooki DAO via the Help Chat Box, with contemporaneous notice of such service via the Online Forum. In these communications, the Commission requested that the Ooki DAO contact counsel for the Commission to discuss the litigation, including service of process.
As of the filing of this motion, the Ooki DAO has not responded to the request to contact counsel for the Commission
While the Ooki DAO did not respond to the CFTC’s request to contact the Commission… it did start discussing all this on its forums, as laid out in a further filing by the CFTC.
Shortly after filing the Motion for Alternative Service, the Commission discovered that, approximately contemporaneous with or shortly after the Commission filed the Motion for Alternative Service, a post appeared in the Ooki DAO’s Online Forum (forum.ooki.com) titled “Future of Ooki DAO” and discussing the Commission’s litigation against the Ooki DAO…. This demonstrates clear awareness by the Ooki DAO and its members of the Commission’s action. Thus, in the Commission’s view, this is relevant to the Court’s consideration of whether to grant the Motion for Alternative Service because it demonstrates the Ooki DAO’s actual notice of the action. The Commission thus requests that the Court consider this additional fact when deciding the Motion for Alternative Service.
And thus, the court okays service by… help bot.
The Motions are GRANTED and the Court orders that service of process on the Ooki DAO may be made in this action by providing a copy of the summons and complaint through the Ooki DAO’s Help Chat Box, with contemporaneous notice by posting in the Ooki DAO’s Online Forum
As the Politico article linked above notes, there are a variety of other legal questions around this case, but get ready for a lot of similar questions cropping up. One thing I will note is that, while it’s great to see experimentation, people really need to recognize that just because you’re experimenting with new forms of organizations, it doesn’t mean you get to just ignore the law. That’s not how any of this works.
Comments on “How Do You Sue A DAO?”
Service of process
FRCP 4(a)(1)(A) says “…the parties.”
A loosely organized mob, a gathering, a few coworkers at happy hour, they could individually be summoned, but there’s no precedent I can find that says:
United States vs people who are members of “That group that gets together on Sundays to have brunch after church.”
There are definitely thorny issues here, and some were handling in trying to dismantle organized crime. The individuals involved were the ones who were called to “justice.” Finding them is the FBI’s job, not creating domestic terrorists from mentally-addled people.
Without a change to FRCP I’m thinking this judge erred, but he did it well, because if the DAO doesn’t appear in his court and claim improper service (or even venue) then it won’t be challenged on an appeal.
Of course there’s always the lawyer representing the anonymous members of a nebulous organization (or someones Mom or a Cow), but if they can evade the whole thing that just creates another precedent that makes no legal sense. You can’t sue a non-entity.
E
Re: Invitation
The DAO hereby invites Counsel for the CFTC to discuss the lawsuit in its forum on the DAO website. Refusing this invitation will be seen as a refusal of pre-trial discussions.
I would think this situation has come up in court before, where the plaintiff wants to sue a group of people who aren’t incorporated, have no formal structure, have no individuals with direct authority to act or speak for the group and who operate entirely through general consensus. As said above, “that group that gets together on Sundays to have brunch after church”. And I suspect that the precedent you’ll find for those situations is very much what this judge did: you can’t force that kind of group to make it convenient for you to serve them, OTOH they can’t evade service that way either and posting the documents on the bulletin board they use to exchange notes will work as long as you can show that they do in fact read and respond to notices there and that you made sure your notice didn’t get taken down or stolen and they’d actually seen it.
Commission Serves Summons On Cloud
I think...
I think this is going to go similar to hidden entities for collaborative crime. Rather than hitting a single hierarchy as the leadership, they will indeed go to all users involved, similar to busting a criminal ring formed by multiple criminal enterprises. Suing the DAO itself is the first step to finding those responsible or deciding everyone involved is equally responsible, then ferreting out the movers, such as those who brought the proposition to the table. I think it’s only strange due to the nature of how the investigation is starting.
And I’d expect more things like this to start cropping up as technology continues to move forward, but until we get lawmakers who aren’t afraid of iPhones and the the scary lady in the fridge that reminds them to get more milk, things are going to remain piecemeal and judicially decided like in this case.
Now, there’s only one question that remains.
Could this be considered RICO? (It probably is not!)
It sounds like the behavior of Ooki Dao is pretty close to being an emergent property, rather than an intentional behavior.
Might as well sue a swarm of bees for not alighting on the hive in a geometric pattern.
Uh…practice?
Re:
The Dao that can be sued is not the eternal Dao.
Re:
Crest a service DAO on a chain that creates a logged contract of Service
Legal Tools...
Dealing with this type of organization really isn’t an issue for criminal cases. The government has had some really over-powered (some would say unconstitutional) tools like RICO for dealing with criminal conspiracies among “amorphous blobs of people coming together for a common purpose” – aka gangs. The hurdles to identifying the real names of people in a DAO are probably a little higher than for a criminal gang, but not insurmountably so.
Civil cases could be a bit more interesting, but again there are legal mechanisms for unmasking John and Jane Doe respondents. The catch is to bridge the gap between any privately-held platform of the DAO and their underlying service providers.
Cue new DAO players on the DarkWeb in 3…. 2….
While the government can (allegedly) ferret out such sites/persons, it takes a lot longer, with a hella lot more resources. By that time, the DAO under scrutiny will have accomplished its purpose and disbanded. Tracing them afterwards will require double or even triple the time and manpower, and I imagine, at some point the government will either put it on a shelf until someone trips up, or possibly technology gives them a leg up on finding such organizations/people.
Don't believe the hype
The claim that something is decentralized should never be accepted at face value. The meaning of the claim is that it is controlled by a large number of independent actors, each with roughly equivalent power. This is almost never true in practice, see this DARPA-sponsored report from Trail of Bits entitled “Are Blockchains Decentralized?”:
https://assets-global.website-files.com/5fd11235b3950c2c1a3b6df4/62af6c641a672b3329b9a480_Unintended_Centralities_in_Distributed_Ledgers.pdf
or this article from Prof. Angela Walch:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3326244
There will always be a small group of actors behind the veil who can be identified and sued.
What, you can’t just ignore the law?
Ooki DAOki, boomer.
And in this moment humanity managed to dodge the future robot overlords, by putting them to work handling legal issues.
No one quite understood how it was possible but law bots started showing signs of depression & alcoholism.
While they thought using bots would speed trials up, the laws constructed by man could not be processed by logical programmed minds.
The first data center explosion is linked to the first bot case in East Texas over a patent covering putting rounded corners on sandwiches that was being used to sue phone makers over rounded icons.
Just the beginning
Decentralization has just broken the soil. As the seed grows it will get harder and harder to regulate entities. What if the bot was a generic product of a 3rd party, unrelated to the organization? What happens if DAOs are run by decentralized AI? I could go on and on. As people see that governments have no authority over these types of organizations, they will tend to gravitate to them. In the end, the people who make the most money off these ventures, involved or not, will end up paying for these types of suits.
Big money
Eventually big money will catch up and figure out that it’s the 2020s and the people have the power now.
Much like GameStop. Despite any internet quackery, thousands of actual gamers also bought stock to save the company.
This law suit is simply an assault on the people having more power.
If the law is unjust you nullify it.
Plus there is the question of where the Ooki DAO operates legal juristiction wise. There is often to much USA centric thinking going, both at places like CFTC and by people living there.