8 ms·

Those who are involved in this industry should be aware of this pending lawsuit: https://www.skadden.com/insights/publications/2022/05/putative-class-action-la

by numair 4y ago

Those who are involved in this industry should be aware of this pending lawsuit: https://www.skadden.com/insights/publications/2022/05/putative-class-action-lawsuit-alleges-dao-members?sid=49bdc89c-9f37-4add-b562-c70b57e34072 https://www.skadden.com/insights/publications/2022/05/putati... You are going to see a lot of political maneuvering by the sorts of A16Z, Binance, FTX, Galaxy Digital, and — dare I say it — Y Combinator, to keep cases like this from getting very far. If all of this gets classified as general partnerships engaged in securities law violations (and worse, as per Terra/Luna), a lot of arrogant investors and market boosters will find themselves in more trouble than they imagined.

chrisco255 4y ago
Broadly classifying everything as a general partnership is not going to happen. Number one, there are already states such as Wyoming that have laws on the books allowing you to register a DAO as a DAO LLC. Number two, much of crypto is international and lawsuit will have no jurisdiction there.
- gnopgnip 4y ago
  You can claim a state or country doesn’t have jurisdiction, but if consumers are harmed the courts see it differently
  - goindeep 4y ago
    Hundred percent this.
  - chrisco255 4y ago
    And how are they going to enforce it or serve it? At any rate, no, there is no way that any online organized group of people (dao is a loosely defined word, except where legally defined and protected as in Wyoming) will be determined to be legally and universally and internationally jointly and severally liable. That's not to say that some suits won't be brought but even if bzx lost their case it would not be necessarily a reflection on other legal or political arrangements.
    - georgeecollins 4y ago
      >> there is no way that any online organized group of people (dao is a loosely defined word, except where legally defined and protected as in Wyoming) will be determined to be legally and universally and internationally jointly and severally liable. That's an assertion that may be tested when there are tens or hundred of millions of dollars at stake. In our everyday lives how you would go after something like a DAO is not at all obvious. But that doesn't mean there are ways. And you are right to say it will be a reflection of other legal and political arrangements.
    - arcticbull 4y ago
      > And how are they going to enforce it or serve it? Have you, uh, met America? Not only is America litigious, the long arm, when sufficiently motivated, will get you anywhere on the face of the planet. Just ask Assange. Not that I support this behavior, or this privilege, but I'm not ostrich enough to pretend it's not on the table. > dao is a loosely defined word, except where legally defined and protected as in Wyoming That may matter in Wyoming, but in America, I assure you, the 'ill defined' nature won't stop the prosecutors.
      - chihuahua 4y ago
        I mostly agree, but one place people can escape to is Moscow, where Edward Snowden has relocated to. Of course, Russia has become less attractive recently.
        malermeister 4y ago
        I wonder how Ed is doing these days...
        Adrox 4y ago
        He used to tweet daily… Now in the last 3 months he stopped. I wonder if there is no more authorative government actions to denounce…
- tehlike 4y ago
  This is simply not true. US has very long arms when it comes to fraud or violations. If it's consumers are harmed, they might seek criminal charges even.
  - jpgvm 4y ago
    Precisely. If the US doesn't have juristiction they will just seek extradition and generally get it unless they fuck up the case horribly (like the Kim Dotcom situation).
    - mytailorisrich 4y ago
      Depends on the country. Some countries do not extradite their citizens and some others only if what they are accused of is also illegal in their own jurisdiction...
      - LightG 4y ago
        This case comes to mind ... https://www.politico.eu/article/wife-of-us-diplomat-anne-sacoolas-to-face-uk-court-over-death-of-british-teenager-harry-dunn/ https://www.politico.eu/article/wife-of-us-diplomat-anne-sac... At core, as with most things, it's unfortunately a question of power, not legality ...
    - forum_ghost 4y ago
      What did they screw up with Kim?
      - jpgvm 4y ago
        Everything. They couldn't for the life of them work out how to follow procedure so they got crucified by the NZ courts. If they had just done shit by the book they would have had him on US soil with no problems at all. FWIW I don't agree that he -should- be able to be extradited. Just stating the fact that if the US had just not screwed the pooch they would have been successful in doing so.
  - 4y ago
- throwawaycities 4y ago
  Is this your legal advice?
junofan 4y ago
They were running it out of a Delaware LLC formed in 2017? Am I reading that correctly? That’s not standard practice now for obvious reasons. I don’t think many people in the industry will care about this case, but I could be wrong.
- thih9 4y ago
  What are the obvious reasons?
  - dbavaria 4y ago
    To avoid the jurisdiction of the SEC.
    - thih9 4y ago
      But what changed? Not from US, missing context.
      - pcl 4y ago
        My interpretation of peyton’s comment was that the crypto industry players these days incorporate in places with more legal and regulatory flexibility than the US these days, not that something has changed in US regulations to make Delaware less favorable.
        xg15 4y ago
        Or in other words "wait, they actually incorporated in the US and not on the Cayman Islands or in Hong Kong or in $Obscure South Pacific Country You Never Heard Of? Amateurs!"
        malermeister 4y ago
        Is it just me or does this raise more red flags than a soviet parade? If an industry needs "more legal flexibility" that just screams scam to me.
throwawaycities 4y ago
I think you are misunderstanding that article and the underlying case. It’s not a legal argument that all DAOs are all General Partnerships, but specifically DAOs not using or “wrapped” by a legal entity might be classified as General Partnerships. It’s no different than any sole proprietorship or business not protected by a legal entity, there can be unlimited personal liability.
- numair 4y ago
  No misunderstanding. A much larger number of projects than you might imagine, and a much larger portion of the oversight etc of projects that seem quite formal and structured, pass through informal structures such as DAOs. More importantly, a large portion of the economic value of many projects passes through these informal, legally untested structures. And, as anyone who has read ICO white papers and read through the “tokenomics” can tell you, a significant portion of that economic interest is held by VC “whales” such as Binance and A16Z (greater than 5% = significant). There may not be blood, but there will definitely be a whole lot of lobbying.
  - throwawaycities 4y ago
    Ok, I guess I misunderstood your comment: >If all of this gets classified as general partnerships to literally mean all as opposed to only those DAOs that in fact are General Partnerships. Either way, it’s nothing new in law nor surprising. I’m not saying their isn’t legal risk or potential liability issues, but it’s certainly not something A16Z isn’t aware of, they have written about the legal issues pertaining to DAOs extensively, just one example: https://a16zcrypto.com/wp-content/uploads/2022/06/dao-legal-framework-part-1.pdf https://a16zcrypto.com/wp-content/uploads/2022/06/dao-legal-...
    - numair 4y ago
      Thanks for the link, hadn’t seen it. It actually reinforces my point — don’t you think it’s a bit weird that a 30 page “legal framework” uses the word “securities” only once, in a footnote? I can tell you as a matter of fact that IRL conversations with any competent legal counsel about DAO governance does not relegate the topic of securities to a single footnote. These guys know they’re playing with fire. They assume they can buy their way out of legal problems — which, well, it’s America in 2022. It’s probably true!
sperm 4y ago
PoolTogether is facing a similar lawsuit as well

by numair 4y ago

chrisco255 4y ago

Broadly classifying everything as a general partnership is not going to happen. Number one, there are already states such as Wyoming that have laws on the books allowing you to register a DAO as a DAO LLC. Number two, much of crypto is international and lawsuit will have no jurisdiction there.

gnopgnip 4y ago
You can claim a state or country doesn’t have jurisdiction, but if consumers are harmed the courts see it differently
- goindeep 4y ago
  Hundred percent this.
- chrisco255 4y ago
  And how are they going to enforce it or serve it? At any rate, no, there is no way that any online organized group of people (dao is a loosely defined word, except where legally defined and protected as in Wyoming) will be determined to be legally and universally and internationally jointly and severally liable. That's not to say that some suits won't be brought but even if bzx lost their case it would not be necessarily a reflection on other legal or political arrangements.
  - georgeecollins 4y ago
    >> there is no way that any online organized group of people (dao is a loosely defined word, except where legally defined and protected as in Wyoming) will be determined to be legally and universally and internationally jointly and severally liable. That's an assertion that may be tested when there are tens or hundred of millions of dollars at stake. In our everyday lives how you would go after something like a DAO is not at all obvious. But that doesn't mean there are ways. And you are right to say it will be a reflection of other legal and political arrangements.
  - arcticbull 4y ago
    > And how are they going to enforce it or serve it? Have you, uh, met America? Not only is America litigious, the long arm, when sufficiently motivated, will get you anywhere on the face of the planet. Just ask Assange. Not that I support this behavior, or this privilege, but I'm not ostrich enough to pretend it's not on the table. > dao is a loosely defined word, except where legally defined and protected as in Wyoming That may matter in Wyoming, but in America, I assure you, the 'ill defined' nature won't stop the prosecutors.
    - chihuahua 4y ago
      I mostly agree, but one place people can escape to is Moscow, where Edward Snowden has relocated to. Of course, Russia has become less attractive recently.
      - malermeister 4y ago
        I wonder how Ed is doing these days...
        Adrox 4y ago
        He used to tweet daily… Now in the last 3 months he stopped. I wonder if there is no more authorative government actions to denounce…
tehlike 4y ago
This is simply not true. US has very long arms when it comes to fraud or violations. If it's consumers are harmed, they might seek criminal charges even.
- jpgvm 4y ago
  Precisely. If the US doesn't have juristiction they will just seek extradition and generally get it unless they fuck up the case horribly (like the Kim Dotcom situation).
  - mytailorisrich 4y ago
    Depends on the country. Some countries do not extradite their citizens and some others only if what they are accused of is also illegal in their own jurisdiction...
    - LightG 4y ago
      This case comes to mind ... https://www.politico.eu/article/wife-of-us-diplomat-anne-sacoolas-to-face-uk-court-over-death-of-british-teenager-harry-dunn/ https://www.politico.eu/article/wife-of-us-diplomat-anne-sac... At core, as with most things, it's unfortunately a question of power, not legality ...
  - forum_ghost 4y ago
    What did they screw up with Kim?
    - jpgvm 4y ago
      Everything. They couldn't for the life of them work out how to follow procedure so they got crucified by the NZ courts. If they had just done shit by the book they would have had him on US soil with no problems at all. FWIW I don't agree that he -should- be able to be extradited. Just stating the fact that if the US had just not screwed the pooch they would have been successful in doing so.
- 4y ago
throwawaycities 4y ago
Is this your legal advice?

junofan 4y ago

They were running it out of a Delaware LLC formed in 2017? Am I reading that correctly? That’s not standard practice now for obvious reasons. I don’t think many people in the industry will care about this case, but I could be wrong.

thih9 4y ago
What are the obvious reasons?
- dbavaria 4y ago
  To avoid the jurisdiction of the SEC.
  - thih9 4y ago
    But what changed? Not from US, missing context.
    - pcl 4y ago
      My interpretation of peyton’s comment was that the crypto industry players these days incorporate in places with more legal and regulatory flexibility than the US these days, not that something has changed in US regulations to make Delaware less favorable.
      - xg15 4y ago
        Or in other words "wait, they actually incorporated in the US and not on the Cayman Islands or in Hong Kong or in $Obscure South Pacific Country You Never Heard Of? Amateurs!"
      - malermeister 4y ago
        Is it just me or does this raise more red flags than a soviet parade? If an industry needs "more legal flexibility" that just screams scam to me.

throwawaycities 4y ago

I think you are misunderstanding that article and the underlying case. It’s not a legal argument that all DAOs are all General Partnerships, but specifically DAOs not using or “wrapped” by a legal entity might be classified as General Partnerships. It’s no different than any sole proprietorship or business not protected by a legal entity, there can be unlimited personal liability.

numair 4y ago
No misunderstanding. A much larger number of projects than you might imagine, and a much larger portion of the oversight etc of projects that seem quite formal and structured, pass through informal structures such as DAOs. More importantly, a large portion of the economic value of many projects passes through these informal, legally untested structures. And, as anyone who has read ICO white papers and read through the “tokenomics” can tell you, a significant portion of that economic interest is held by VC “whales” such as Binance and A16Z (greater than 5% = significant). There may not be blood, but there will definitely be a whole lot of lobbying.
- throwawaycities 4y ago
  Ok, I guess I misunderstood your comment: >If all of this gets classified as general partnerships to literally mean all as opposed to only those DAOs that in fact are General Partnerships. Either way, it’s nothing new in law nor surprising. I’m not saying their isn’t legal risk or potential liability issues, but it’s certainly not something A16Z isn’t aware of, they have written about the legal issues pertaining to DAOs extensively, just one example: https://a16zcrypto.com/wp-content/uploads/2022/06/dao-legal-framework-part-1.pdf https://a16zcrypto.com/wp-content/uploads/2022/06/dao-legal-...
  - numair 4y ago
    Thanks for the link, hadn’t seen it. It actually reinforces my point — don’t you think it’s a bit weird that a 30 page “legal framework” uses the word “securities” only once, in a footnote? I can tell you as a matter of fact that IRL conversations with any competent legal counsel about DAO governance does not relegate the topic of securities to a single footnote. These guys know they’re playing with fire. They assume they can buy their way out of legal problems — which, well, it’s America in 2022. It’s probably true!

sperm 4y ago

PoolTogether is facing a similar lawsuit as well