Bancor DAO Faces Legal Setback Due to No-Show in Court

A federal court in Texas has issued a default ruling against the Bancor DAO, which operated the eponymous DeFi platform.

The decision to close the case stemmed from the defendant’s failure to respond to a summons posted in January 2024 on the forum of the decentralized autonomous organization.

The court ruled in favor of the plaintiffs, who filed a class action lawsuit in May 2023. They accused Bancor of misleading investors by concealing liquidity issues that surfaced in 2022 and providing false information about the effectiveness of its Impermanent Loss Protection (ILP) mechanism.

The plaintiffs claimed that the ILP was functioning at a deficit and was funded through the launch of Bancor v3, which allegedly promised high returns “without risk to users.” However, in June 2022, the project halted the ILP, citing “hostile market conditions.”

According to the lawsuit, the Bancor token (BNT) was an unregistered security, and the Bancor DAO itself was characterized as an unincorporated partnership among holders of the vBNT tokens.

Previously, the case was dismissed since the protocol’s developers were located outside the U.S., but it was reopened in December 2024.

The plaintiffs stated that the DeFi platform «seems to be unregistered in any jurisdiction and lacks a physical office, mailing address, officers, directors, or appointed agents.»

As of the time of writing, the platform holds $39 million in assets locked within the protocol, which, according to DeFi Llama, is a 98% decrease from its peak value recorded in May 2021.

It’s worth noting that in November, a court in California classified the managing Lido DAO as a legal entity in the form of a general partnership. This ruling implies that the participants in the structure are subject to liability for its actions.