Texas court issues judgment against Bancor DAO after it ignored summons

A Texas national justice has entered a default judgement against Bancor DAO, which operated the decentralized concern level Bancor, aft it failed to respond to an online summons. 

Judge Robert Pitman issued the judgement aft Bancor DAO did not look to support itself pursuing a summons that was posted connected the DAO’s forum successful January 2024.

“Defendant Bancor DAO has failed to reply oregon different support itself wrong the clip allowed, and that plaintiffs person demonstrated that failure,” wrote territory tribunal clerk Philip Delvin connected March 13.

The people enactment involves investors who assertion they mislaid tens of millions of dollars owed to the exchange’s nonaccomplishment to pass astir liquidity issues during a 2022 withdrawal spike.

Clerk’s introduction of default against Bancor. Source: Law360

According to the plaintiffs, who filed the suit successful May 2023, Bancor deceived investors astir its impermanent nonaccomplishment extortion mechanics for liquidity providers and besides claimed its token was an unregistered security. 

They said Bancor’s ILP operated astatine a shortage and tried to screen by launching a caller product, v3, which promised “some of the astir competitory returns anyplace […] without asking users to instrumentality connected immoderate risk.”

Impermanent losses hap wrong DeFi automated marketplace shaper models erstwhile liquidity providers deposit assets into a pool, and 1 of the tokens loses worth against different successful the pool. 

Bancor paused impermanent nonaccomplishment protection, citing “hostile” marketplace conditions successful June 2022.

The plaintiffs besides argued that Bancor DAO is an “unincorporated wide partnership” consisting of vBNT tokenholders and could beryllium sued successful that capacity, according to Law360.

The lawsuit was antecedently dismissed wholly due to the fact that the protocol developers were not based successful the United States, but was reopened successful December.

The plaintiffs said that the DeFi level “does not look to beryllium registered successful immoderate jurisdiction and has nary carnal bureau location, mailing address, officers, directors, oregon appointed agents.”

Bancor is an onchain liquidity protocol that enables automated, decentralized speech crossed blockchains. It has $38 cardinal successful full worth locked, a fig that is down 98% since its highest successful May 2021, according to DeFillama.

Related: Lawsuits could beryllium catastrophic for DAOs if denied ‘limited liability’

The ruling follows precedent from a akin lawsuit wherever the Commodity Futures Trading Commission won a default judgment against Ooki DAO.

A California national justice besides ruled successful November that DAOs and their governing members tin beryllium sued successful cases involving unregistered securities.

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