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A California judge has ruled that members of decentralized autonomous organizations (DAOs) can be held liable for the actions of other members under the state's partnership laws.
On November 18, Judge Vince Chhabria of the U.S. District Court for the Northern District of California ruled that Lido DAO's governing bodies qualify as partners under California's general partnership laws. As a result, members cannot escape responsibility for the actions of the organization.
Lido DAO's "partners" are not immune from the lawsuit
The lawsuit stems from a complaint by Andrew Samuels, who purchased tokens issued by the Lido DAO. The investor sued the company for damages. Samuels argued that the tokens were unregistered securities, arguing that the Lido DAO should have registered them with the U.S. Securities and Exchange Commission.
"Samuels argues that because the Lido DAO never registered the securities, it is liable for its losses under Section 12(a)(1) of the Securities Act," the lawsuit says.
The court ruled that Samuels had reasonably argued that Lido DAO and its partners could not claim immunity. According to the lawsuit, the judge determined that Lido DAO qualifies as a general partnership under California law, holding the partners liable.
Samuels argued that four major institutional investors in Lido — Paradigm Operations, Andreessen Horowitz, Dragonfly Digital Management, and Robot Ventures — acted as partners in the Lido DAO and should be held accountable.
In response, four persons involved in the case filed motions to terminate the case. However, only one was provided. The court file stated:
"As a result, the motion for dismissal filed by Robot Ventures was granted because Samuels did not provide sufficient evidence that Robot Ventures is a member of the Lido general partnership. All other petitions for dismissal are rejected."
The judge found that Paradigm, Andreessen Horowitz, and Dragonfly were considered general partners because of their alleged involvement in the governance and operations of the Lido DAO. However, Robot Ventures avoided liability due to insufficient evidence that it was the general partner.
"Huge blow" to decentralized governance
Miles Jennings, General Counsel and Head of Decentralization at a16z Crypto, called the decision a huge blow to decentralized governance.
Jennings explained that according to the ruling, even posting on forums can be enough to hold DAO members accountable for the actions of other members under general partnership laws.
Source
On November 18, Judge Vince Chhabria of the U.S. District Court for the Northern District of California ruled that Lido DAO's governing bodies qualify as partners under California's general partnership laws. As a result, members cannot escape responsibility for the actions of the organization.
Lido DAO's "partners" are not immune from the lawsuit
The lawsuit stems from a complaint by Andrew Samuels, who purchased tokens issued by the Lido DAO. The investor sued the company for damages. Samuels argued that the tokens were unregistered securities, arguing that the Lido DAO should have registered them with the U.S. Securities and Exchange Commission.
"Samuels argues that because the Lido DAO never registered the securities, it is liable for its losses under Section 12(a)(1) of the Securities Act," the lawsuit says.
The court ruled that Samuels had reasonably argued that Lido DAO and its partners could not claim immunity. According to the lawsuit, the judge determined that Lido DAO qualifies as a general partnership under California law, holding the partners liable.
Samuels argued that four major institutional investors in Lido — Paradigm Operations, Andreessen Horowitz, Dragonfly Digital Management, and Robot Ventures — acted as partners in the Lido DAO and should be held accountable.
In response, four persons involved in the case filed motions to terminate the case. However, only one was provided. The court file stated:
"As a result, the motion for dismissal filed by Robot Ventures was granted because Samuels did not provide sufficient evidence that Robot Ventures is a member of the Lido general partnership. All other petitions for dismissal are rejected."
The judge found that Paradigm, Andreessen Horowitz, and Dragonfly were considered general partners because of their alleged involvement in the governance and operations of the Lido DAO. However, Robot Ventures avoided liability due to insufficient evidence that it was the general partner.
"Huge blow" to decentralized governance
Miles Jennings, General Counsel and Head of Decentralization at a16z Crypto, called the decision a huge blow to decentralized governance.
Jennings explained that according to the ruling, even posting on forums can be enough to hold DAO members accountable for the actions of other members under general partnership laws.
Source
