A federal court judge ruled on Monday that Lido DAO, the governing body behind the popular liquid staking protocol, can be treated as a general partnership under state law. 

The court rejected Lido’s claim that it isn’t a legal entity, classifying it as a general partnership and setting a precedent for how profit-driven DAOs are treated.

It was also ruled that identifiable participants were managing the DAO’s operations and, therefore, could not evade liability through its decentralized structure, according to court documents filed in the U.S. Northern District Court of California.

“[The lawsuit] presents several new and important questions about the ability of people in the crypto world to inoculate themselves from liability by creating novel legal arrangements to profit from exotic financial instruments,” Judge Vince Chhabria wrote in his ruling.

Paradigm Operations, Andreessen Horowitz, and Dragonfly Digital Management were implicated as general partners based on their alleged active involvement in Lido governance and operations. 

However, Robot Ventures, another Lido investor, was dismissed due to insufficient allegations of active participation.

General Counsel and Head of Decentralization at a16z crypto, Miles Jennings, said Judge Chhabria’s decision had “dealt a huge blow to decentralized governance” in a statement posted to X on Monday.

“Under the ruling, any DAO participation (even posting in a forum) could be sufficient to hold DAO members liable for the actions of other members under general partnership laws,” he said.

What happened

According to court documents, plaintiff Andrew Samuels purchased LDO tokens on the secondary market in April and May 2023 through the Gemini exchange. 

By December of that year, Samuels filed a class-action lawsuit after incurring losses from purchasing the platform’s native LDO tokens, alleging they were sold to him as unregistered securities, and held Lido DAO liable for the decline in their value.

On Monday, the court agreed with Samuels’ contention, finding Lido’s structure—where token holders govern decisions and earn from staking rewards—constitutes a general partnership under California law. It also found Lido DAO’s lack of direct token sales did not exempt it from liability.

“The courts have construed the statutory phrase ‘offers or sells’ broadly to cover someone who ‘solicits’ the purchase of securities. Samuels has adequately alleged that Lido indeed solicited the purchase of these tokens on crypto exchanges.”

Lido DAO functions as a general partnership, as it involves “the association of two or more persons to carry on as coowners a business for profit forms a partnership, whether or not the persons intend to form a partnership,” the court ruled, citing state law.

Edited by Sebastian Sinclair

J. Christopher Giancarlo, affectionately known as “Crypto Dad,” dismissed speculation that he is being considered to replace Gary Gensler as head of the Securities and Exchange Commission (SEC).

On Thursday,  the former Chair of the U.S. Commodity Futures Trading Commission (CFTC) took to X to deny reports he was seeking the agency’s top job.

“I’ve made clear that I’ve already cleaned up an earlier Gary Gensler[‘s] mess,” he said. “[I] Don’t want to have to do it again.”

He also pushed back against rumors he was seeking “some crypto role” within the U.S. Treasury Department, claiming they were “also wrong.”

The buzz around Giancarlo’s potential return to a regulatory role comes amidst speculation of a shake-up at the SEC following Donald Trump’s re-election, with Gary Gensler’s position as chairman hanging in the balance.

Giancarlo served as a commissioner at the CFTC from June 2014 to April 2019, stepping into the role shortly after Gensler’s departure as CFTC chair.

He earned the nickname “Crypto Dad” as he became a top figure in the crypto community by advocating for crypto innovation during his tenure. 

After stepping down from his role, he co-founded the Digital Dollar Project in January 2020, which seeks to promote discussions on the future of “digital monetary innovations.”

Giancarlo has maintained that central bank digital currencies (CBDCs) are not the only path forward, noting that “crypto, CBDCs, stablecoins, and more” is the global future.

President-elect Donald Trump, whose return to the Whitehouse in January marks a significant comeback for the Republican party, has vowed to quash any future CBDC policy.

The crypto community is bracing for the possibility of Gensler’s departure, as Trump has also promised to replace the current SEC chair, whose term runs until 2026. 

Giancarlo is not the only name being floated; other pro-crypto candidates include SEC Commissioners Hester Peirce and Mark Uyeda, former Binance.US CEO Brian Brooks, and others.

Gensler, a contentious figure in the crypto space, hinted at his possible departure during a speech at the 56th Annual Institute on Securities Regulation on Thursday. 

At the end of the speech, he stated, “It’s been a great honor to serve with them, doing the people’s work, and ensuring that our capital markets remain the best in the world,” referring to his SEC colleagues. 

The pressure on Gensler is at an all-time high this week as 18 states, along with the DeFi Education Fund, filed a lawsuit accusing the SEC of overreaching its authority on crypto regulations.

Filed Thursday, the suit alleges that under Gensler’s leadership, the SEC deliberately bypassed standard procedures and withheld new crypto rules to pursue a “regulatory land grab.”

Edited by Sebastian Sinclair

When trying to regain access to your Kraken account, you may be asked to jump on a video call with a support agent to prove you are actually who you say you are.

Last month, the centralized exchange said it caught someone wearing a Halloween-style rubber mask attempting to fool the worker on the other side of the call—but it didn’t work.

The attacker had raised a number of red flags during the first round of checks, such as failing to name the assets that the account held. These flags caused the agent working the case to require a video call to grant access to the account. During the call, the Kraken worker asked some more questions and checked the person’s ID.

The attacker failed this stage—in dramatic fashion.

“Our agent was like: This is absolutely ridiculous. This is a rubber mask the guy’s wearing,” Kraken Chief Security Officer Nick Percoco told Decrypt.

The mask didn’t even look like the person the attacker was claiming to be, Percoco said. The victim was a Caucasian male in his early 50s, so it appeared to Percoco that the attacker simply grabbed a mask that vaguely fit the description.

And this isn’t the first time someone has worn a disguise in an attempt to fool Kraken.

“[We] see things, from time to time, where people put on a fake mustache,” he told Decrypt. “They show [ID] and it looks close because they wear the same style glasses, have a mustache, and have blonde hair. We see that from time to time. They never pass.” 

“But this is the first time,” he added, “that someone has gone out to the costume store to get a mask.”

To make matters worse, the attacker didn’t even have a believable ID. It was “clearly” Photoshopped and printed onto card stock, Percoco explained, albeit with the correct information on it.

While this wasn’t a sophisticated attack, it highlights that even sloppy scammers can potentially gain access to the private information of everyday people. Even with such an unpolished attempt, Percoco believes, attackers could see success.

“I think it must [work],” he told Decrypt. “I think people wearing disguises, people who breach another place and get a copy of your government ID, and then print it out on glossy paper, holding that up… for some exchanges, that probably works.”

He claimed that some exchanges do not have the same level of attention to detail that Kraken demands from its team. Percoco specifically points to companies that outsource their support, claiming that this is more likely to lead to mistakes. 

If he’s correct, then this means that those using centralized exchanges shouldn’t always rely on the company to fend off bad actors. To protect themselves, Percoco says, users should deploy two-factor authentication “everywhere”—from your email to well beyond—to prevent bad actors getting any personal information at all costs.

Even with such protection methods employed, a user can still fall for phishing scams. For the top level of security, he recommends using FIDO2 and passkeys, which are hardware keys that can turn your phone or laptop into your password for an account.

“Passkeys are cryptographically bound to the sites and the applications you’re using them with,” he said, “so you can’t be duped into thinking you’re logging into Kraken.”

Edited by Andrew Hayward