Judge Upholds Freeze on SpartacusDAO's $35M in Lawsuit Served Via Discord, NFT

A federal judge is keeping the freeze on $35 million in crypto assets held by SpartacusDAO, a crypto investment project whose leader faces a lawsuit from disgruntled investors in its SPA token.

Judge Victor Marrero upheld his previously signed restraining order against Wei Wu, allegedly the man behind Spartacus, in a hearing in the U.S. Southern District Court of New York on Thursday. Marrero said the order will remain in place until Wu, who has been a no-show, starts to work with the court, said Diogenes Casares, CEO of the investment company suing Wu.

The courtroom decision marks the latest chapter in a multimillion-dollar battle over the future of SpartacusDAO and SPA tokens.

SPA investors unhappy with the progress of the crypto yield project staged a vote last year to dissolve the decentralized autonomous organization and return its value to token holders. But Spartacus has ignored their non-canonical proceedings – the vote did not occur on SpartacusDAO’s traditional governance platform – and pressed on.

Amid all this, Patagon Management LLC, a proprietary crypto trading firm, alleges Spartacus wronged investors by holding Wu's own token redemption program that he front-ran for $4.3 million in profit. In its lawsuit against the DAO leader, the prop trading firm also alleges violations of securities laws and shareholder obligations.

Serving Spartacus Discord

Late last month, a lawyer representing Patagon informed Spartacus, whom they identified in court papers as Wei Wu, of a lawsuit with legal papers posted to SpartacusDAO’s Discord server, the project’s town hall. Within minutes the post was deleted and the lawyer was banned, according to court documents.

The back-and-forth highlights the challenges and also opportunities of conducting legal business in the crypto’s digital native realm, where defendants are more easily located on Twitter, Discord and governance forums than the meatspace.

“Especially in the crypto space, people have to take what they can get, and if the only manifestation of a party that wronged you is via a Discord server, well, that’s where you have to go” to serve them, said Nelson Rosario, an attorney who works in crypto.

SpartacusDAO is a crypto yield project and Ohm fork on the Fantom blockchain whose treasury has attracted activist investors who seek to redeem their SPA tokens for the treasury’s underlying assets. According to Patagon, Spartacus has absolute power over the treasury and is ignoring governance token holders' demands. Last year he staged – and front-ran – his own token redemption program, but is now ignoring a community vote to hold another.

Leader gone AWOL

Spartacus “basically dropped off the map last year. And we couldn't find a location” to serve him at, Casares told CoinDesk in a phone interview. He said he connected the pseudonymous Spartacus to the real world identity Wei Wu by cross-checking a variety of internet records.

After private investigators came up cold and a notice served over email yielded no response, Casares said his team turned to Discord as a last resort. If Spartacus not only ignored but deleted the notice there, he said, then perhaps he could be held in contempt of court.

“It’s the same way that if you serve someone, put the letter on their doorstep with a giant thing saying ‘this is a legal letter,’ and then they throw it out – that's contempt of court,” he said.

Indeed, the letter was deleted and neither Spartacus nor Wu has formally responded to the allegations. Patagon’s lawyers pulled out another legal trick Wednesday and attempted to serve the defendant via a non-fungible token (NFT).

Wu did not immediately respond to a request for comment from CoinDesk.