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Homepage > News > Business > Lido DAO ruling, significant or not? A ruling last week in the class action lawsuit against decentralized finance (DeFi) organization Lido DAO has put stakeholders of DeFi in line to be liable for the misdeeds of the organizations in which they invest, causing much consternation among the digital currency community. However, such reactions may be premature, as it remains to be seen whether any of the named investors in the suit will end up being held liable once the case is heard. On November 18, Judge Vince Chhabria of the United States District Court for the Northern District of California ruled that institutional investors of a decentralized autonomous organization (DAO), Lido DAO, can potentially be held liable for actions of the decentralized governing body behind the liquid staking protocol on the Ethereum blockchain. Broadly, a DAO is a group run by rules and smart contracts encoded in blockchain software, with decisions being made collectively by members without, in theory, the need for or presence of a central authority. Such a structure can make it difficult to hold individuals behind the organization to account, which is why the Lido DAO lawsuit sought to draw certain key stakeholders into the firing line. Judge Chhabria’s ruling produced a swift and worried reaction from investors in DeFi—and crypto bros that enjoy the protection from accountability offered by DAOs—seeing that they may become liable for the actions of decentralized projects with which they are involved. Miles Jennings, General Counsel and Head of Decentralization at Andreessen Horowitz (a16z) (NASDAQ: ZAHIDX), one of the venture capital (VC) firms named in the suit and now potentially liable for Lido DAO’s actions, epitomized this response: “Today, a California judge dealt a huge blow to decentralized governance. Under the ruling, any DAO participation (even posting in a forum) could be sufficient to hold DAO members…

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Filed under: News - @ November 25, 2024 2:26 pm