CT5GPMNDWJIGXBQ7YNMRN5CKX4 6 Insiders Can't Sue bZx Because It's an Amorphous Crypto Collective, Defendants Say

Insiders Can’t Sue bZx Because It’s an Amorphous Crypto Collective, Defendants Say

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– The bZx case involves claims by DAO participants against their own DAOs.
– The class action alleges that the bZx DAO, as well as a successor DAO called Ooki, were a de facto general partnership and the partnership bears responsibility for the losses of some of its members.
– The class action names two Delaware companies as defendants: Leveragebox LLC, which created the open-source web interface that allows users to access the bZx platform; and bZeroX LLC, which developed the bZx protocol that allows users to trade and lend crypto tokens on margin.
– On Monday, most of the defendants (but not the DAOs) moved to dismiss the class action.
– Defense lawyers at Morrison Cohen and Hahn Loeser & Parks offered some technical arguments, asserting, for instance, that bZeroX, Leveragebox and their founders have no duty to DAO tokenholders and therefore, under economic loss doctrine, cannot be liable for losses from the hack.
– The motion also said that the terms of use for the website that allows access to the bZx platform expressly disclaims liability for whatever happens on the trading protocol.
– But more importantly, when it comes to the development of DAO law, the motion contends that DAOs are not general partnerships.
– The biggest problem with plaintiffs DAO partnership theory, the brief said, is that under the amorphous and oft-changing” definition offered in the complaint, the plaintiffs themselves are partners. So if their theory is correct, the brief said, they are just as responsible for the security breach that led to the $55 million hack as every other tokenholder.
– Plaintiffs’ lawyer Jason Harrow of Gerstein Harrow told me defendants’ argument is a red herring because the name plaintiffs did not hold governance tokens so were not part of the DAO. (They just used the platform.) And even in cases in which DAO participants assert claims against general partners, Harrow said, active members of the collective who direct the DAO’s conduct should bear more liability than small players on the sidelines.

 

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