US Judge in Ooki DAO Trial Orders CFTC to Serve Original Founders With Lawsuit

A federal judge has ordered the Commodity Futures Trading Commission (CFTC) to serve Tom Bean and Kyle Kistner with its lawsuit against Ooki DAO.

Bean and Kistner are the founders of bZeroX, a company that allowed its users to trade crypto derivatives products in the U.S. Bean and Kistner converted the company into a decentralized autonomous organization (DAO), which eventually rebranded to Ooki DAO.

While the CFTC settled charges with Bean and Kistner, the agency also brought separate charges against Ooki DAO, alleging it conducted similar illegal conduct to bZeroX. Members of the crypto industry tried to push back against the CFTC's approach, however. While the regulator wanted to serve its lawsuit to the entire DAO at once by posting the suit in a Help chat bot and on a web forum, industry participants argued the CFTC should identify actual members of the DAO and serve them directly instead.

The U.S. District Court for the Northern District of California held a hearing on the matter last week. While District Judge William Orrick did not make a ruling on that day, on Monday he ordered the CFTC to serve the same suit to Bean and Kistner.

"At the hearing, the CFTC asserted it knew that some of Ooki DAO’s Token Holders reside and conduct business in the United States because the two founders of Ooki DAO’s predecessor entity, bZeroX LLC, are Token Holders who reside in the United States. This was new information to me," the judge wrote. "Neither the complaint nor the CFTC’s Motion for Alternative Service mention that the former founders, Tom Bean and Kyle Kistner, are or have been Token Holders."

One of the issues at question is whether the DAO is aware that it has been served with a lawsuit. Orrick, both in comments during last week's hearing and in Monday's order, said he believed the DAO is aware, though he did not explicitly say whether he would rule that the CFTC has satisfied all of the arguments it needs to in order to serve the DAO.

"To provide the best practicable notice, the CFTC should serve at least one identifiable Token Holder if that is possible. I will delay entering that order until the CFTC has made that attempt," Orrick wrote.