Court Ruling Could Affect the Future Direction of DAOs
I found another article by some lawyers that is interesting about this case:<p><a href="https:&#x2F;&#x2F;us.eversheds-sutherland.com&#x2F;mobile&#x2F;NewsCommentary&#x2F;Legal-Alerts&#x2F;250623&#x2F;DAO-members-may-be-jointly-and-severally-liable-for-55-million-crypto-theft" rel="nofollow">https:&#x2F;&#x2F;us.eversheds-sutherland.com&#x2F;mobile&#x2F;NewsCommentary&#x2F;Le...</a><p>What I find most fascinating is that most &quot;DAOs&quot; you see are entirely window dressing: at the end of the day, there are a few people who actually run the assets and control the code being run who are merely promising to take direction at the whim of the people who hold some token, which is effectively just an illegal way to build a corporation and sell stock.<p>It is possible to do something that is actually run by a truly decentralized and autonomous mechanism but there are serious limits; like, if you are running things on just Ethereum you can write code that handles code upgrades by using an on-chain vote... but it would not be trivial (I won&#x27;t say quite impossible) for the DAO holders to then vote to transition the system to Polygon somehow, as what would that <i>mean</i> from the perspective of the code running on Ethereum? Or like, you couldn&#x27;t have the DAO on Ethereum do something as simple as own a .com domain name.<p>This situation is in some sense no different for this DAO. They apparently had an actually-decentralized one on Ethereum, which is surprising as it is so rare... but, as mentioned in this article I found--and not in the article linked for this thread which is concentrating on the general partnership question--they cut corners when they decided to go multi-chain, and the DAO supposedly owned contracts on a couple other networks, including Polygon.<p>The hack then wasn&#x27;t &quot;the DAO decided to use buggy code and now the DAO members are liable&quot;: it was a phishing attack against a single developer sitting on a single key that allowed for control of the code--and thereby the money--on Polygon, as the DAO was only really able to ask that developer to take action and then hope he did it.<p>That extra context to me makes this whole thing even more of a fascinating case study. Like, one might then just want to say &quot;this thing was never decentralized to begin with: the owner of the key was liable&quot; and yet weirdly the case isn&#x27;t brought merely against that developer... it is brought against the DAO that in some sense supposedly hired the developer and was negligent in letting the one developer have the key for all the money on another network, something they never should have done!<p>In some sense, then, this is a remarkable win for the concept of a DAO. I mean, sure: some people likely wanted a DAO to be some kind of &quot;regulatory arbitrage&quot; (as noted in complaints about them here on Hacker News) and are going to be sad at the idea that the DAO holders actually have some kind of liability in the actions that the DAO takes...<p>...but that was NEVER--I am serious: NEVER--an informed take on a DAO. The point isn&#x27;t to make it somehow impossible to sue the people who own it, it is to build a new form of organization wherein the ownership is liquid and people have a direct democracy over the actions of the organization. If someone sued a co-operative--a common form of company where the customers and&#x2F;or employees are the owners; I have had numerous friends who lived in the local student housing co-op and I&#x27;m myself a member of the local food co-op--it would not be surprising or disappointing to me if all the people who were deemed owners had some potential liability.<p>Now, I don&#x27;t think the co-op holders (such as myself if my local food co-op does something bad, even though I absolutely am allowed to go to meetings and vote on their actions!) actually have much liability, but only because American corporate law is out of control on liability separation; like, I personally think big tech shareholders should have joint and several liability over the shit decisions these companies make that harm customers; but that (very sadly to me and I believe incorrectly) isn&#x27;t how it tends to work in the United States... hell: the employees and even managers of the company taking the actions often don&#x27;t have liability, which is just crazy-town.<p>But so, OK: when I see this argument that the DAO can actually be a defendant and can actually have liability that can actually be shared among its owners, to me that is an almost-incredible vindication of the concept. Hell: apparently, the companies that were the original developers of this mess in fact were considered to NOT have liability anymore, having SUCCESSFULLY transferred that to the DAO? That&#x27;s hilarious!!<p>Now, does this mean it is a good idea to own &quot;shares&quot; in a DAO? Hell no ;P. And yeah: I&#x27;d like to think this would kill a lot of interest in holding a non-negligible quantity (as it can be hard to not own any, which is why this article focused on non-negligible) of the tokens for a DAO, in the same way I can&#x27;t imagine many people would own stock in Apple if they could be held <i>joint and severely liable</i> (which maybe is actually going &quot;too far&quot;... we here in the US love our liability extremes ;P) for its actions.