US Judge: Government tokens to carry lawful accountability

The DAOs that are responsible for governing the alleged decentralized crypto protocols happen to be looked upon as cooperatives. The members of these cooperatives take part in matters of making decisions, as well as, at times, sharing the profits amongst themselves. Observing this factor, a Californian Federal Judge has come out with his opinion that under this case scenario, they should distribute the associated legal risk factors too. 

As per the latest information received, the owners of BZRX, which happens to be a supposed governance token, have come under the scrutiny of a District Judge, Larry Burns, who has issued an official order for the filing of a class-action lawsuit against them. This is with regards to a hacking of the amount of $55 million, for which the judge feels they should absolutely be held responsible. 

Under these circumstances, there happen to be a couple of uncomfortable questions cropping up. One of them would be related to the significance of an enterprise being decentralized. The further associated questions would be the fact as to what kind of accountability is shared amongst the DAO members and also the users of the protocol managed by them. 

The Founders of bZx DAO, who in this case, happen to also be the defendants, have requested closure of the lawsuit filed, with the argument that according to their membership in a decentralized and autonomous enterprise, they do not possess any control of the crypto that happen to be deposited by the users in the bZx protocol, and neither are they answerable to them. 

Burns, however, refused them any relief and shared his opinion that the BZRX tokens provide control of the protocol, as well as the revenue that comes through it, this being the normal way of understanding the ownership issue of businesses. In his viewpoint, the hacking occurred due to a bZx developer getting duped by a phishing scam. According to him, it is possible for the founders to be general partners. 

However, according to the Principal of Degen Legal, Zach Rozenberg, the entire system seems to be shying away from the actual problem and instead observing the real execution of governance, along with the issue of the management of administration. In his opinion, the industry often co-relates decentralization with trustlessness. There being plenty of members in the DAO does not signify the fact that it is the protocol that is trustless. 

It was in the year 2019 that the bZx protocol happened to have been delivered by Tom Bean and Kyle Kistner. During that time, it was managed by bZerox, which was their own company. After a period of two years, the management was shifted to bZx DAO, operated by BZRX token holders. As per Kistner, they will now be absolutely ready for the entire regulatory scenario. 

Through the order issued by Burns, he has made a supposition that taking part in governance could tell if a holder of BZRX is actually a general partner. In this case scenario, and according to Erich Dylus, who happens to be an independent attorney, the important question arises as to what exactly entails governance functioning. His further questions are, 

If the votes are taken on-chain, do they happen to self-implement, or do holders of tokens take part in Snapshot votes that require a third party to implement the desired alterations? In his opinion, a DAO which does that happens to be more vulnerable to a legal body classification that it actually does not need.

Roxanne Williams

Roxanne Williams has recently joined as a market reporter for CryptoNewsZ - the 24/7 crypto news site, where she produces recent stories, technical analysis and price updates on world's leading cryptocurrencies.

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