Federal judge William Orrick said he did not previously know that Tom Bean and Kyle Kistner were current token-holders at Ooki DAO.

A federal judge has ordered the Commodity Futures Trading Commission (CFTC) to serve Tom Bean and Kyle Kistner with its lawsuit against Ooki DAO.

Bean and Kistner are the founders of bZeroX, a company that allowed its users to trade crypto derivatives products in the U.S. Bean and Kistner converted the company into a decentralized autonomous organization (DAO), which eventually rebranded to Ooki DAO.

While the CFTC settled charges with Bean and Kistner, the agency also brought separate charges against Ooki DAO, alleging it conducted similar illegal conduct to bZeroX. Members of the crypto industry tried to push back against the CFTC’s approach however: while the regulator wanted to serve its lawsuit to the entire DAO at once by posting the suit in a help chat bot and on a web forum, industry participants argued the CFTC should identify actual members of the DAO and serve them directly instead.

The U.S. District Court for the Northern District of California held a hearing on the matter last week. While District Judge William Orrick did not make a ruling on that day, on Monday he ordered the CFTC to serve the same suit to Bean and Kistner.

“At the hearing, the CFTC asserted it knew that some of Ooki DAO’s Token Holders reside and conduct business in the United States because the two founders of Ooki DAO’s predecessor entity, bZeroX LLC, are Token Holders who reside in the United States. This was new information to me,” the judge wrote. “Neither the complaint nor the CFTC’s Motion for Alternative Service mention that the former founders, Tom Bean and Kyle Kistner, are or have been Token Holders.”

One of the issues at question is whether the DAO is aware that it has been served with a lawsuit. Orrick, both in comments during last week’s hearing and in Monday’s order, said he believed the DAO is aware, though he did not explicitly say whether he would rule that the CFTC has satisfied all of the arguments it needs to in order to serve the DAO.

“To provide the best practicable notice, the CFTC should serve at least one identifiable Token Holder if that is possible. I will delay entering that order until the CFTC has made that attempt,” Orrick wrote.

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Time is running out for the DAO to respond to court filings in what could be a major test for crypto governance.

Ooki DAO, the first so-called decentralized autonomous organization (DAO) dragged to court over alleged lawbreaking in the U.S., is struggling to muster a response to the Commodity Futures Trading Commission (CFTC) with just days to go before it risks automatically losing its case.

Fear that simply expressing their views could fuel a further legal crackdown may be keeping community members from voting to fund their own legal defense, community members and an observer told CoinDesk. The result: a decentralized crypto governance group whose members are skittish about defending themselves using the tools of crypto governance.

The investor collective’s members (Ooki DAO token owners) are accused of illegally running Ooki Protocol as an unregistered leveraged crypto exchange that does not collect customer data. Ooki is the decentralized successor to bZeroX, LLC, an equivalent centralized exchange whose founders have already settled their equivalent charges with the CFTC.

The CFTC is now trying to hold Ooki’s decentralized management – its DAO token holders – accountable for the platform’s alleged wrongdoing. In late September, it filed a complaint against Ooki token owners who have participated in governing the Ooki Protocol by using their tokens to vote in the DAO.

According to the fluid philosophies of decentralized crypto governance such a lawsuit shouldn’t be possible. When bZeroX’s founders gave Ooki DAO control of their platform in August 2021, they thought that community governance would “future-proof” the protocol from regulators, who wouldn’t know who to sue. The CFTC disagreed and sued the whole community.

Culpability through participation may help explain why Ooki’s latest governance question on the “Future of Ooki DAO” has gotten zero traction. On Monday, a proposal to create a legal defense fund, and to block U.S. users from Ooki failed with zero votes either for or against.

“Probably people are afraid to vote at the moment,” said an Ooki DAO community member who goes by “Frank” on Telegram. “We will proceed with an onchain proposal and see how that goes.”

Their fear may be well-founded. According to attorney Nelson Rosario, who runs a crypto law practice, token holders may fear that by simply voting on Ooki DAO’s response to legal threats, they could get wrapped up in them.

A second go at the vote received three “yes” responses by press time. If that procedural measure passes, Ooki DAO will hold a binding vote on-chain, Frank said.

If it passes the proposal pledges to use Ooki DAO’s treasury for legal fees of “any DAO members named in a complaint,” pursue a crowdfunded legal defense fund to protect other DAOs that catch regulators’ ire and allocate the treasury toward the continued operation of the DAO.

If this process is meant to yield a formal response to the CFTC, then the DAO is running short on time: the court’s deadline is by Friday.

Data website Nansen indicates that Ooki DAO has over $3 million in cash on hand, much of it in native tokens.

“I can assure you the Ooki DAO contributors will continue developing our protocol since we have enough funds available,” Frank said.

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