When a DAO Ignores a Summons: A Tale of Woe and Sarcasm

In the vast and tumultuous expanse of the digital realm, a Texas federal judge, with a demeanor as stern as a winter’s night, has cast a shadow upon the elusive Bancor DAO. This entity, which once prided itself on its decentralized finance platform, has now found itself ensnared in the web of its own negligence, failing to respond to an online summons as if it were a mere whisper in the wind. 😏

Judge Robert Pitman, a figure of authority, issued a judgment that echoed through the corridors of justice, for Bancor DAO, in its infinite wisdom, chose not to defend its honor after a summons was posted on the DAO’s forum in the bleak month of January 2024. Ah, the irony! A digital entity, so proud of its autonomy, reduced to a mere footnote in a legal document. 📜

“Defendant Bancor DAO has failed to answer or otherwise defend itself within the time allowed, and that plaintiffs have demonstrated that failure,” wrote the district court clerk, Philip Delvin, on the fateful day of March 13. One can almost hear the chuckles of fate as it plays its cruel game. 🎭

This class action, a veritable circus of disgruntled investors, claims they lost tens of millions of dollars due to the exchange’s failure to issue a warning about liquidity issues during a withdrawal spike in 2022. A tragedy, indeed, but one that seems to have been met with a shrug from the DAO. 🤷‍♂️

The plaintiffs, those brave souls who filed their suit in May 2023, allege that Bancor deceived them regarding its impermanent loss protection mechanism. They claim it was akin to a mirage in the desert—beautiful yet utterly unattainable. The audacity! They further assert that Bancor’s ILP operated at a deficit, attempting to mask its failures by launching a new product, v3, which promised “some of the most competitive returns anywhere […] without asking users to take on any risk.” Oh, the sweet taste of irony! 🍭

Impermanent losses, those cruel jesters of the DeFi world, occur when liquidity providers deposit assets into a pool, only to watch in horror as one token loses value against another. Bancor, in a moment of clarity, paused its impermanent loss protection, citing “hostile” market conditions in June 2022. A wise move, or merely a desperate gasp for air? 🤔

The plaintiffs, in their quest for justice, argued that Bancor DAO is an “unincorporated general partnership” consisting of vBNT tokenholders, thus making it susceptible to legal action. A clever twist in this tale! According to Law360, the case had previously been dismissed due to the protocol developers not being based in the United States, but alas, it was reopened in December, as if the universe had decided to give it another chance. 🌌

They further claimed that the DeFi platform “does not appear to be registered in any jurisdiction and has no physical office location, mailing address, officers, directors, or appointed agents.” A ghost in the machine, perhaps? 👻

Bancor, a once-mighty onchain liquidity protocol, now finds itself with a mere $38 million in total value locked—a staggering 98% decline since its peak in May 2021, according to DeFillama. A cautionary tale for all who dare to tread the treacherous waters of decentralized finance! ⚓

The ruling follows a precedent set by a similar case where the Commodity Futures Trading Commission triumphed over Ooki DAO. A reminder that even in the digital age, the law can be as unforgiving as a winter’s chill. ❄️

In November, a California federal judge ruled that DAOs and their governing members can indeed be sued in cases involving unregistered securities. A lesson learned, albeit too late for some. 🕰️

2025-03-14 08:37

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