Sushi DAO along with its current Head Chef Jared Grey appears to be swimming in regulatory waters after news broke on Tuesday that they had been served with a subpoena by the US Securities and Exchange Commission (SEC).
The disclosure came in the form of a proposal asking members of the DAO to vote on the establishment of a “Legal Defense Fund.” Grey, who authored the proposal, said that the goal of the defense fund was to cover legal costs for core contributors.
The proposal recommended setting up a defense fund with $3 million worth of USDT stablecoin, which will go towards covering legal costs regarding “inquiries, litigation, and other issues targeting core contributors” of the project since April 2022. The said amount will be funded with Kanpai fees (50%), Grants (35%), and Sushi (TWAP market sells – 15%). Meanwhile, another $1 million in USDT will be made available if the initial $3 million is used up.
Although Grey did not reveal when the subpoena was served, he stated that Sushi DAO was cooperating with the SEC, adding that:
We do not intend to comment publicly on ongoing investigations or other legal matters.
Over at the forum, some members questioned how the DAO got subpoenaed. One DAO member named Test1 said: “the human I get, but sushi is a DAO, without centralized entity, isn’t it? I understand if they go for Jared, but how are they trying to get the DAO? By pressuring us with going after Jared?”
Corroborating Test1’s comments another member named Miohtama said:
Yes. The SEC will go for easy victories and the easiest is to grab anyone on US soil. The simplest solution would be to make sure that Sushi DAO does not have anyone from the US involved from now on. This puts the US contributors and Sushi itself at unnecessary risk.
Interestingly, Sushi DAO approved a proposal to create a legal structure a few months ago. The October 2022 bill upheld the creation of three entities based in Panama and the Cayman Islands to manage the activities of the DAO.
This is not the first time that regulators are going after decentralized organizations. Last September, the Commodity Futures Trading Commission (CFTC) filed a lawsuit against Ooki DAO.
Comment from the DAO contributor Matt
I think the DAO should approve spending treasury funds to cover team legal expenses with a few prerequisite details before an official vote. Jared states "Sushi, and Head Chef Jared Grey, were recently served with an SEC Subpoena". I would like to know what the DAO subpoena looks like. If it's just Jared, does that materially change things? Who will the signers on the multisig be?
He also stated that he would prefer a change in the breakdown of fund origins, expressing a preference for liquidating the token set rather than any SUSHI. He added:
I believe the DAO should cover expenses because otherwise no (doxxed) contributors will be willing to participate in the future. Making sure the DAO protects its contributors is paramount to attracting quality members.