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  • L Higgins and M Bacina

Aragon DAO fuels legal battle over token distribution

In a recent development, the Aragon DAO, a prominent industry decentralised autonomous organisation, is embroiled in a legal dispute with its own founding team. The Aragon Association's decision to dissolve its governing body and distribute substantial assets to tokenholders without consulting the DAO has ignited tensions within its community.

On 2 November, the Aragon Association made a bold announcement, revealing its plan to dissolve the governing body and utilize the organisation's treasury to allow ANT tokenholders (ANT being the governance token of the Aragon DAO) to redeem their ANT tokens for ETH. This strategic move was set to return approximately USD$155 million in digital assets to the stakeholders.

However, the decision to shut down the ANT token and dissolve the governing body without prior consultation with the DAO has sparked discontent within the community. This dissent came to a head on 21 November when the DAO passed a vote to allocate 300,000 USDC of the treasury's funds to Patagon Management, a Delaware-based company owned by Diogenes Casares, tasking them with leading negotiations and a lawsuit against the Aragon Association team.

Casares, in a statement to Cointelegraph, expressed concern over the perceived injustice, claiming that the Aragon Association is set to receive an overwhelming 70% of the entire treasury, along with an additional USD$20 million already set aside. According to Casares, this distribution model would leave investors with a mere USD$50 million, a fraction of the total assets. He emphasised the absurdity of the situation, citing the team's accelerated vesting of Aragon tokens (ANT), which he believes should have been owned by the DAO, further diluting investors' stakes:

We believe this will be an example case that such blatantly malicious activity is illegal and we are looking forward to proving this in court

Casares sees this legal battle as an opportunity to set a precedent against what he deems as nefarious activity, emphasising the need for accountability and transparency within blockchain governance.

The approved proposal grants Patagon Management the authority to maintain confidentiality during the legal process and make strategic decisions. However, it also mandates transparency in financial transactions related to the case, with all reports made public. Additionally, to prevent any conflicts of interest, Patagon Management will store the funds in a separate wallet address and a bank account isolated from the company's regular business accounts.

This development is sure to set a precedent in DAO governance, perhaps being one of the first instances that DAO members have collectively voted to pursue a legal action against the founders of the platform. Any decision of a court may also provide much sought after clarity regarding the legal personality of a DAO.

Despite the pending legal battle, the Aragon Association is continuing to make moves. On 30 November, a separate sub-team within the Aragon Association announced the launch of "OSx", its new DAO infrastructure, alongside the Aragon App on Arbitrum, which is a leading Ethereum Layer-2 network.

Nonetheless, as the legal drama unfolds, the clash highlights the complexities and challenges inherent in blockchain governance, while also underscoring the importance of establishing clear guidelines and ensuring transparency to maintain within a decentralised community.

By Luke Higgins and Michael Bacina


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