Global: CFTC Penalizes Blockchain Protocol $250K, Files Action Against Successor DAO

The order penalizes the protocol and its founders Tom Bean and Kyle Kistner $250,000 for offering illegal, off-exchange trading of digital assets, registration violations and neglecting to adopt a customer ID program required by the Bank Secrecy Act compliance program.

The CFTC has simultaneously filed a civil enforcement action charging the Ooki DAO, the successor to bZeroX, with violating the same laws as bZeroX. It seeks restitution, disgorgement, civil monetary penalties, trading and registration bans and injunctions against further violations.

“These actions are part of the CFTC’s broader efforts to protect U.S. customers in a rapidly evolving decentralized finance environment,” said Acting Director of Enforcement Gretchen Lowe in a statement. “Margined, leveraged, or financed digital asset trading offered to retail U.S. customers must occur on properly registered and regulated exchanges in accordance with all applicable laws and regulations. These requirements apply equally to entities with more traditional business structures as well as to DAOs.”

Commissioner Summer Mersinger opposed the action, however, saying she was disappointed the commission chose to act.

“We cannot arbitrarily decide who is accountable for those violations based on an unsupported legal theory amounting to regulation by enforcement while federal and state policy is developing,” Mersinger said in a statement explaining her dissent.