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A former investor has filed a class action lawsuit against Lido DAO in a District Court of San Francisco.
The plaintiff, Andrew Samuels, a Solano County, California resident, has filed a lawsuit over the potential mismanagement and distribution of Lido tokens.
The lawsuit claims that the Lido token is effectively an unregistered security, thereby making Lido DAO, along with several venture capital and investment management firms, responsible for the financial losses incurred by the plaintiffs due to the token’s decline in value.
In the lawsuit, Samuels emphasizes that a significant majority, approximately 64%, of Lido tokens are in the hands of a select few founding members and early-stage investors.
These entities include notable venture capital firms such as Paradigm, AH Capital Management, Dragonfly Digital Management, and Robert Ventures.
This concentration of token ownership, the plaintiff argues, has marginalized the influence of regular investors on the governance and decision-making processes within the Lido ecosystem.
See Also: Revolut Halts Crypto Services For Business Clients In The UK Amid Regulatory Changes
Challenge for Lido
The narrative of the lawsuit delves into the origins of Lido DAO, which initially emerged as a general partnership comprising institutional investors.
Over time, the organization shifted its strategy to offer what is referred to as a ‘potential exit opportunity’ for these investors.
The shift led to the public sale of Lido tokens, facilitated by their listing on centralized cryptocurrency exchanges.
It is asserted that this move attracted investments from a wide array of investors, including the plaintiff, but subsequently led to a downturn in the token’s market value, resulting in substantial losses for these investors.
The lawsuit also claims that Lido tokens may qualify as securities because a central group manages them and that investors purchased them with expectations of profit, primarily influenced by the actions and decisions of this central group.
If proven, the lawsuit makes some bold claims, which could create significant challenges for the DAO. Lido is one of the leading liquidity staking protocols in the market, with its TVL recently hitting an all-time high of $22 billion.
At the time of writing, the DAO has yet to release a statement on the issue.
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