U. S. court ruled on class action lawsuit against bZX DAO
2023.03.28 14:02
U. S. court ruled on class action lawsuit against bZX DAO
By Kristina Sobol
Budrigannews.com – A United States district judge ruled in a new update to the class-action lawsuit against bZX DAO members that the arrangement is custodial because developers can upgrade a smart contract where the key is held by a single developer.
A decision regarding the class-action lawsuit against bZx DAO and others was made by United States District Judge Larry Alan Burns on March 27. While the decision appeared to be typical on a superficial level, Web3 legal counselors recognized a critical improvement for decentralized independent associations (DAOs).
The defendants in the case said that because users can keep custody of their assets, transactions using the bZx protocol are not custodial. However, the distinction between the terms was rendered meaningless by a successful phishing attack. According to the court filing,
“A hacker was able to gain access to all of the funds supposedly in [users’] custody after a successful phishing attack on a bZx developer, rendering the distinction between custodial and non-custodial funds meaningless here.”
The crypto company Delphi Labs’ general counsel, Gabriel Shapiro, tweeted that the court’s decision makes the arrangement custodial for a single developer who holds the upgrade key. Shapiro mentioned that developers who use multiple sigs might also interpret this in the same way.
Decentralized finance (DeFi) platforms with multisignature support may be regarded as custodial platforms in the event of this. In order to comply with the law, this could necessitate that these projects obtain the appropriate custody licenses.
Hedera’s deputy general counsel, Gregory Schneider, offered his thoughts on the lawsuit as well. The lawyer says that the decision has a big impact on the DAO space. According to Schneider, “anyone thinking about legal liability in the DAO space must closely examine the case.”
