CFTC Punishes Blockchain Protocol $250,000 And Civil Complaint Against Ooki DAO

The Commodity Futures Trading Commission (CFTC) imposed a $250,000 fine against bZeroX providing illegal trading and also filed a civil lawsuit against bZeroX’s successor Ooki DAO for similar violations.

The Commodity Futures Trading Commission has issued an order filing and settling charges against blockchain software protocol bZeroX and its founders, the CFTC announced in a press release Thursday. The bZx protocol, a protocol for decentralized lending and other activities. The bZx protocol drew headlines in 2021 after suffering code exploits, resulting in the loss of hundreds of thousands of dollars with of crypto. 

For providing illicit, off-exchange trading of digital assets, registration violations, and failing to adopt a customer ID program required by the Bank Secrecy Act compliance program, the ruling fines the protocol and its creators Tom Bean and Kyle Kistner $250,000.

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.

The suit was filed in the U.S. District Court for the Northern District of California. In its complaint, the CFTC accused Ooki DAO of using its structure to evade regulatory oversight.

“A key bZeroX objective in transferring control of the bZx Protocol (now the Ooki Protocol) to the bZx DAO (now the Ooki DAO) was to attempt to render the bZx DAO, by its decentralized nature, enforcement-proof. Put simply, the bZx founders believed they had identified a way to violate the Act and Regulations, as well as other laws, without consequence.”

“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.

Acting Director of Enforcement Gretchen Lowe said in a statement.

The CFTC identifies Ooki DAO as “an unincorporated association comprised of holders of Ooki Tokens,” liable in the suit. 

Kistner, Bean, and bZeroX “unlawfully engaged in activities,” which required registration under existing commodities rules, according to a separate settlement decision made public by the CFTC. The founders were charged by the commission with breaking anti-money laundering regulations.

According to the order, the three did not agree or disagree with the CFTC’s conclusions.

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