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Decentralized exchange SushiSwap and its CEO Jared Grey have been subpoenaed by the US Securities & Exchange Commission.
Grey made the announcement on Tuesday via SushiSwap's forum. In the post, Grey said the firm is cooperating with the SEC, which is demanding the production of documents related to a case under investigation.
SushiSwap plans to establish a legal defense fund to "cover legal costs for core contributors and multisig participants."
Read more: Horse Allegedly Gets Fingered so SushiSwap Tanks… Cos Crypto
Its DAO proposal aims to make 3 million USDT available for the legal fund with a contingency that would make another 1 million USDT available if the intial funds deplete.
Following the disclosure, SushiSwap's SUSHI token fell over 5% in an hour from $1.22 to $1.14. At the time of writing SUSHI is priced at $1.06.
DAOs have been under the scrutiny of financial authorities. In September, the Commodity Futures Trading Commission (CFTC) filed a lawsuit against Ooki DAO. The court ultimately ruled that the CTFC needs to serve specific individuals of the DAO, not the DAO as a whole.
SEC vs. Crypto
The SEC has been hot on the heels of the crypto industry. Last month, the SEC declared that crypto staking services violate security laws.
Its stance forced Kraken to close its staking services. SEC Chair Gary Gensler also argued that Ether's move to proof-of-stake shifts it to being a security.
Enforcement staff at the SEC issued to BUSD issuer Paxos a Wells notice, which the financial watchdog uses to inform companies and individuals of possible enforcement action. Its notice alleges that BUSD is an unregistered security as the SEC declared that crypto staking services violate security laws.
However, in the beginning of March, the Commodity Futures Trading Commission (CFTC) stated that Ether and stablecoins should be treated as commodities.
Read more: Sorry SEC, Stablecoins Are Commodities According to CFTC
CFTC chair Rostin Behnam believes that Ether is a commodity and should be overseen by the CFTC; a view held by the body in its complaint against FTX founder Sam Bankman-Fried in December.
“Notwithstanding a regulatory framework around stablecoins, they’re going to be commodities in my view,” Behnam said. “It was clear to our enforcement team and the commission that Tether, a stablecoin, was a commodity."
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