CFTC Announces Settled Charges Against bZeroX Protocol

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CFTC Announces Settled Charges Against bZeroX Protocol
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  • In an unprecedented move, the CFTC also sued a related DAO.
  • The Ooki DAO is accused by the CFTC of violating the regulations.

Authorities are still cracking down on crypto. On Thursday, the CFTC announced settled charges against the creators of bZeroX, the business behind the bZx protocol. Tom Bean and Kyle Kistner, founders of bZx, were each fined $250,000 by the Commodities Futures Trading Commission (CFTC). For “illegally offering leveraged and margined retail commodity transactions in digital assets.” And failing to implement Know Your Customer (KYC) regulations.

Penalties on the DAO

However, in an unprecedented move, the CFTC also sued a related DAO. Allegedly formed by Bean and Kistner to decentralize management of the bZx protocol, the Ooki DAO is accused by the CFTC of violating the same regulations. While Bean and Kistner settled charges against themselves and bZeroX without admitting or denying wrongdoing, the CFTC is still looking to impose penalties on the DAO, including disgorgement, fines, and perhaps trading and registration restrictions.

The Commission stated in a press release:

“The order finds the DAO was an unincorporated association of which Bean and Kistner were actively participating members and liable for the Ooki DAO’s violations of the [Commodity Exchange Act] and CFTC regulations.”

A decentralized autonomous organization (DAO) is a kind of organization in which power is shared rather than centralized. Distributed autonomous organizations (DAOs) are decentralized organizations that employ smart contracts on a blockchain and allow users to vote on proposals using governance tokens.

Because they owned Ooki tokens and voted on governance proposals pertaining to how the DAO functioned, the CFTC took the unprecedented step of holding Bean and Kistner responsible for the DAO’s alleged unlawful actions.

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