bZeroX LLC and its founders were fined $250,000 in an enforcement action against the blockchain protocol Ooki DAO, its successor and an independent decentralized organisation.
bZeroX and its founders, Tom Bean and Kyle Kistner, were fined by the CFTC for operating an organisation that provided leveraged and margin trading of digital assets without complying with the Banking Secrecy Act’s “Know Your Customer” identification program.
The CFTC also filed suit versus Ooki DAO, the successor to bZeroX, for breaking the same laws and the government claimed that bZeroX transferred control of the bZx protocol to bZx DAO and then subsequently renamed it Ooki DAO in order to avoid being prosecuted.
Bean and Kistner both oversaw the development of bZx protocol, a decentralized protocol for lending, trading, interest generation and other financial activities on the blockchain.
A DAO is an autonomous organisation with no central leadership where decisions are made through community governance controlled by blockchain protocols and code. Members of the community earn a stake in the DAO by holding cryptographic tokens that allow them to vote on proposals submitted by other members.
CTFC Chairman Rostin Behnam says the actions demonstrate the CFTC’s commitment to aggressively pursuing individuals and operations that purposefully seek to evade regulatory oversight at the expense of retail customers
“I commend our dedicated enforcement team for pursuing this scheme which touches on many areas of concern regarding this growing market.” says Behnam.
Commissioner Summer Mersinger, however, did not concur with the commission’s decision and published a dissent stating her opposition. She concurred that the commission should target bZeroX as a company and its founders as liable parties because of their involvement, but she disagreed with targeting Ooki DAO and its token holders.
“The CTFC did not have the legal authority to punish the DAO, whereas token holders were unfairly targeted. says Mersinger, ”
Recently, the U.S. Treasury Department sanctioned Tornado Cash, a decentralized cryptocurrency mixing service allowing users to anonymize the origins of funds after accusing the service of hiding the proceeds of at least $7 billion worth of virtual currency from criminal activities since 2019.
