The DAO said it would not be commenting on “ongoing legal investigations,” but its existing $100,000 defense fund was apparently not enough.
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Sushi DAO proposed the creation of a legal defense fund on March 21 in response to the “recent” subpoena of Sushi head Jared Grey and the decentralized autonomous organization (DAO) itself by the United States Securities and Exchange Commission.
The DAO’s proposal did not provide details about the SEC subpoena. It stated that it was cooperating with the SEC and that “we do not intend to comment publicly on ongoing investigations or other legal matters.” One community member commented:
“How does ‘sushi’ even get subpoenad [sic]? The human I get, but sushi is a dao. […] How are they trying to get the dao? By pressuring us with going after Jared [Grey]? I got no letter in my mail and I am the Dao just like all the other members.”
Japan-based Sushi DAO operates the SushiSwap decentralized exchange using the SUSHI (SUSHI) token. The DAO proposed a redesign of SUSHI tokenomics at the end of last year after losing $30 million on incentives for liquidity providers in 2022.
Sushi created a legal entity “to reduce liability” and then that entity and an individual associated with it got subpoenaed.
PSA: if there’s an entity, it’s not a DAO
Don’t let lawyers talk you into incorporation… unless you want to be a corporation. https://t.co/DATkdiPTCs
— Erik Voorhees (@ErikVoorhees) March 21, 2023
The new proposal suggests dedicating $3 million to the fund, with a top-up of $1 million if needed. Sales of SUSHI would pay for 15% of the fund. It pointed out that Maker DAO proposed a similar fund in December. Sushi first created a legal defense fund in March 2022, with funding of between $85,000 and $100,000.
Related: Gary Gensler’s SEC is playing a game, but not the one you think
Sushi is reportedly the first DAO the SEC has “targeted” under the chairmanship of Gary Gensler, although the agency has been widely seen as cracking down on the crypto industry in recent months. It has concentrated on staking and custody in particular. In February, the SEC forced centralized exchange Kraken to discontinue its staking service for U.S. clients. Kraken paid $30 million in penalties.