{"id":9721,"date":"2025-03-14T07:51:25","date_gmt":"2025-03-14T06:51:25","guid":{"rendered":"https:\/\/wsj-crypto.com\/?p=9721"},"modified":"2025-03-14T07:51:25","modified_gmt":"2025-03-14T06:51:25","slug":"texas-court-delivers-ruling-against-bancor-dao-for-overlooking-legal-summons","status":"publish","type":"post","link":"https:\/\/wsj-crypto.com\/index.php\/2025\/03\/14\/texas-court-delivers-ruling-against-bancor-dao-for-overlooking-legal-summons\/","title":{"rendered":"Texas Court Delivers Ruling Against Bancor DAO for Overlooking Legal Summons"},"content":{"rendered":"

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A federal judge from Texas has issued a default ruling against Bancor DAO, which managed the decentralized finance platform Bancor, after it neglected to answer an online summons.\u00a0<\/p>\n

Judge Robert Pitman handed down the ruling after Bancor DAO failed to show up to contest the case following a summons that appeared on the DAO\u2019s forum in January 2024.<\/p>\n

\u201cDefendant Bancor DAO has not responded or taken other actions to defend itself within the permitted timeframe, and that plaintiffs have substantiated that inaction,\u201d wrote district court clerk Philip Delvin on March 13.<\/p>\n

The class action pertains to investors who allege they incurred losses amounting to tens of millions of dollars because the exchange did not warn about liquidity problems during a surge of withdrawals in 2022.<\/p>\n

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Clerk\u2019s default entry against Bancor. Source: Law360<\/em><\/p>\n<\/figcaption><\/figure>\n

According to the plaintiffs, who initiated the lawsuit<\/a> in May 2023, Bancor misled investors regarding its impermanent loss protection system for liquidity providers and also asserted that its token constituted an unregistered security.\u00a0<\/p>\n

They claimed Bancor\u2019s ILP functioned at a loss and sought to compensate by introducing a new product, v3, which promised \u201csome of the most attractive returns anywhere [\u2026] without requiring users to assume any risk.\u201d<\/p>\n

Impermanent losses arise within DeFi automated market maker systems when liquidity providers contribute assets into a pool, and one of the tokens diminishes in value relative to another in the pool.\u00a0<\/p>\n

Bancor suspended<\/a> impermanent loss protection, citing \u201cadverse\u201d market circumstances in June 2022.<\/p>\n

The plaintiffs contended that Bancor DAO functions as an \u201cunincorporated general partnership\u201d composed of vBNT token holders and therefore could be sued in that capacity, according<\/a> to Law360.<\/p>\n

The case was previously dismissed entirely because the protocol developers were not located in the United States, but was reinstated in December.<\/p>\n

The plaintiffs stated that the DeFi platform \u201cdoes not appear to be registered in any jurisdiction and lacks a physical office, mailing address, officers, directors, or appointed representatives.\u201d<\/p>\n

Bancor is an on-chain liquidity protocol that facilitates automated, decentralized trading across blockchains. It holds $38 million in total value locked, a figure that has plummeted 98% since its peak in May 2021, according<\/a> to DeFillama.<\/p>\n

Related: <\/strong><\/em>Lawsuits could pose significant risks for DAOs if denied \u2018limited liability\u2019<\/strong><\/em><\/a><\/p>\n

The ruling aligns with precedent from a comparable case where the Commodity Futures Trading Commission secured a default judgment<\/a> against Ooki DAO.<\/p>\n

A federal judge in California also ruled in November<\/a> that DAOs and their governing members could be subjected to lawsuits in matters involving unregistered securities.<\/p>\n

Magazine: <\/strong><\/em>Mystery celebrity memecoin scam factory, HK firm divests Bitcoin: Asia Express<\/strong><\/em><\/a><\/p>\n