- A Lido holder filed a class action lawsuit alleging Lido is an unregistered security and Lido DAO is liable for investors’ losses from the token’s price decline.
- The lawsuit claims Lido began selling tokens to provide an exit for founders and early investors. After attracting public investment, the price fell, causing losses.
- The lawsuit seeks to classify Lido as a security and hold Lido DAO liable for token holder losses. The outcome could impact legal responsibilities of DAOs and founders.
A Lido holder initiated a class-action lawsuit against the governing body for liquid staking protocol Lido according to a complaint filed in a San Francisco United States District Court on Dec 17. The lawsuit alleges that the Lido token is an unregistered security and that the Lido decentralized autonomous organization (Lido DAO) is liable for plaintiff’s losses from the token’s price decline.
Background on the Lawsuit
The complaint was filed against Lido DAO on Dec. 17 by Andrew Samuels, who resides in Solano County, California. The defendants are Lido DAO, as well as venture capital firms Paradigm, AH Capital Management, Dragonfly Digital Management, and investment management company Robert Ventures.
The document alleges that 64% of Lido tokens are dedicated to the founders and early investors like these defendants. Therefore, ordinary investors like Plaintiff are unable to exert any meaningful influence on governance issues.
According to the filing, Lido DAO began as a general partnership made up of institutional investors. But later it decided to have a potential exit opportunity. To facilitate this, it decided to sell Lido tokens to the public by convincing centralized exchanges to make them available on their platforms. Once the tokens were listed, plaintiff Samuels and thousands of other investors purchased them. The price then fell, causing losses for these investors, the document alleges.
It claims that these firms are liable for the losses as a result.
Allegations Against Lido
Quoting US Securities and Exchange Commission Chair Gary Gensler, the document claimed that Lido is a security because there allegedly is a group in the middle between the tokens and investors, and the public is anticipating profits based on that group.
The lawsuit claims Lido DAO began selling tokens to provide an exit opportunity for early investors. After listing the tokens and attracting public investment, the token price declined, causing losses. The lawsuit alleges the founders and early investors are liable for these losses.
Conclusion
The lawsuit aims to classify Lido as an unregistered security and hold Lido DAO liable for losses suffered by token holders. The outcome of the case could have significant implications for the legal responsibilities of DAOs and their founders. Lido DAO governance token holders may also be impacted if the plaintiffs prevail.
