A former Lido holder has filed a class-action lawsuit against the Lido decentralized autonomous organization (DAO), a governing body that manages the liquid staking protocol, according to a recent court document.
An unregistered securities claim
Andrew Samuels filed the complaint on December 17th in a Northern California courthouse, alleging Lido’s token, LDO, was knowingly offered and sold as an unregistered security.
The complaint states that as a DAO, Lido was set up “with the explicit goal of avoiding regulatory scrutiny for its fundamentally illegal business.”
“As one Lido DAO member put it, there was an understanding that Lido could avoid ‘the potential of SEC enforcement action’ because “[t]he Lido DAO is a fully-decentralized organization with no legal entities,” the complaint reads in part.
Moreover, the complaint calls on the words of U.S. Securities and Exchange Commission (SEC) Chair, Gary Gensler, who “recently stated that, other than Bitcoin, all crypto ‘tokens are securities because there’s a group in the middle [between the tokens and investors] and the public is anticipating profits based on that group.’”
A tipped balance of power
Originally starting with a small cluster of investors, Lido DAO was able to open its platform to the public by posting its token to centralized crypto exchanges. However, this caused its price to fall drastically, causing losses to smaller investors like Samuels.
Furthermore, Samuels alleges that the staking protocol’s concentration of power was tipped in the favor of its institutional investors including Dragonfly, Paradigm, Robot Ventures, and AH Capital Management, all of which are listed as partner defendants in the lawsuit.
“The Lido founders and its institutional investors like Partner Defendants were not content to simply run Lido’s (fundamentally illegal without registration) business for a profit,” the complaint reads in part, “They also wanted to be able to earn money on their investments through a potential “exit” opportunity.”
“Because 64 percent of the tokens are dedicated to the founders and early investors like Partner Defendants, ordinary investors like Plaintiffs are unable to exert any meaningful influence on governance issues,” the filing continues.
An impressive liquid staking protocol
Samuels is arguing that Lido DAO is responsible for his and other clients’ losses and is requesting rescissory damages.
As one of the largest liquid staking protocols in the crypto industry, Lido boasts a TVL of greater than $20 billion. The most recent data shows its market cap at an estimated $1.85 billion.
Samuels is asking for a jury trial, coverage of legal fees, and more.
Image source: Pixabay
The post Former Lido Holder Files Lawsuit Against Lido DAO appeared first on Cryptonews.