Lido DAO Faces Class-Action Lawsuit Over LDO Token Alleged to be Unregistered Security

blockchain.news:

Lido DAO, a decentralized autonomous organization governing the liquid staking protocol Lido, is currently embroiled in a class-action lawsuit. The lawsuit, filed by former LDO holder Andrew Samuels, alleges that Lido's LDO token is an unregistered security and holds Lido DAO liable for the financial losses incurred due to the token's price decline.

Lido is a prominent protocol in the blockchain ecosystem, enabling users to stake their Ether (ETH) and receive staking rewards. Users get a derivative token called stETH, which can be utilized in various applications. The Lido DAO, comprising LDO token holders, is responsible for governance decisions within this protocol. Lido stands out in the DeFi space, having locked more than $19 billion worth of cryptocurrency in its contracts, marking it as the largest in terms of total value locked for any liquid staking derivative​​​​​​​​​​.

Details of the Lawsuit

The class-action lawsuit was filed in a San Francisco United States District Court on December 17, 2023. Andrew Samuels, the plaintiff, is a resident of Solano County, California. He asserts that the LDO token, governed by Lido DAO, is an unregistered security according to the U.S. Securities and Exchange Commission's criteria. The lawsuit includes defendants such as Lido DAO, AH Capital Management LLC, Paradigm Operations LP, Dragonfly Digital Management LLC, and Robot Ventures LP. These entities are alleged to hold significant control over LDO tokens, limiting the influence of regular investors on governance issues​​​​​​.

The Core Allegation

Samuels' main contention is that the Lido DAO began as a general partnership led by institutional investors, later transitioning to public token sales for potential exit