On July 11, the Lido community reached an important decision on the Snapshot governance page, with members voting to approve a proposal to appoint a designated organization to respond to ongoing class actions against the Lido DAO. This step marks an important moment for the DAO and reflects its effective approach to addressing legal challenges head-on. Class action lawsuit number 3:23-cv-06492 was filed in the United States District Court for the Northern District of California.
Lido DAO and Legal Challenges
The complaint names “LIDO DAO, a general partnership,” as a defendant and accuses it of operating an Ethereum staking business and alleges that LDO tokens or transactions qualify as securities.
Additionally, Lido DAO is accused of offering or selling these securities to the public in violation of securities laws. This case represents a significant legal hurdle for the Lido DAO, which could potentially impact its operations and the broader DeFi landscape.
Court Decision and Lido DAO's Reaction
On June 27, a critical decision was made by the court, finding that it was lawful for the plaintiffs to serve legal documents on Lido DAO through various public statements.
This decision required Lido DAO to respond within 14 days. Otherwise, the DAO could have faced a default judgment in favor of the plaintiffs. The urgency and seriousness of the situation forced the Lido community to act quickly.
Designation of Dolphin CL, LLC.
While the proposal did not recognize that the Lido DAO was a partnership, association, or other legally identifiable group or entity, it did propose the designation and funding of Dolphin CL, LLC, a Delaware limited liability company.
Dolphin has been tasked with hiring legal counsel, which is expected to be provided by Brown Rudnick, a firm where Stephen Palley is a lead partner. This strategic move is designed to ensure a strong defense against the allegations presented in the lawsuit.
How Will Financing Be Provided?
To facilitate this, funding of 200,000 DAI was requested in the proposal. This amount is intended to cover the costs of Dolphin and its legal team, particularly in preparing, presenting and defending a motion to dismiss the claims against Lido DAO.
The community's approval of this proposal reflects their determination to protect the DAO's interests and continue its operations amid regulatory scrutiny.
