Establish Sushi Legal Defense Fund

Proposals
1

Establish Sushi DAO Legal Defense Fund

Goal

Establish a legal defense fund to cover legal costs for core contributors and multisig participants.

Summary

The international regulatory environment for DAOs remains in flux, and the options for contributor insurance policies remain limited. Therefore, we propose Sushi DAO make available a legal defense fund of 3M USDT. This fund will cover legal costs regarding inquiries, litigation, and other issues targeting core contributors. As proposed in March '22, Sushi (Sushi Legal Structure) sought to establish a legal entity to reduce liability for contributors and the DAO. Yet, it has become evident funds must be available to handle legal needs for operational continuity and to protect core contributors.

Cause

Sushi, and Head Chef Jared Grey, were recently served with an SEC Subpoena. We’re cooperating with the SEC. We do not intend to comment publicly on ongoing investigations or other legal matters.

Coverage

The Sushi DAO Legal Defense Fund will provide coverage for reasonable attorneys’ fees and costs for the following parties:

  1. Core contributors and multisig participants active since the ratification of Sushi 2.0 (Sushi 2.0: A Restructure For The Road Ahead) to present.

Clauses

Disbursements will occur until legal expenses meet the following requirements:

  1. The Legal Defense Fund will make ongoing payments until legal proceedings conclude.

If a contributor resigns or is terminated:

  1. The Legal Defense Fund will make ongoing payments until legal proceedings conclude.

Financials

We recommend that Sushi DAO makes the following funds available:

  1. Total: $3,000,000 USDT

Accounting

  1. The 3M will reside in a new multisig, making funds available for legal representation as needed.

Breakdown

Funds will come from a combination of the following:

  1. Kanpai fees (lump sum): 50%
  2. Grants (BD revenue): 35%
  3. Sushi (TWAP market sells): 15%

We believe this breakdown limits the financial burden while providing needed funds for legal expenses, protecting Sushi DAO’s financial solvency, and addressing the immediate need for representation.

Contingency

If funds deplete, the DAO will make 1M USDT available, as needed, until legal proceedings conclude. The DAO will receive financial disclosures per the Governance Dashboard (coming Q2 23).

Based on community feedback, two edits are proposed:

1. The contingency will cap at 2, 1M payouts, bringing the total available funds to 5M, requiring review from the community for extra funds.

2. Legal coverage will extend to multisig participants with eligibility extended per Coverage terms.

Precedent

Recently, MakerDAO provided a similar legal defense fund here: MIP55c3-SP14: Defense Fund - Archive - The Maker Forum. DAOs must execute similar proposals to help manage liability for core contributors.

  • Yes - Establish Legal Defense Fund
  • No - Do Not Establish Legal Defense Fund

0 voters

1 Like
2

Replying to be part of history

4 Likes
3

How does “sushi” even get subpoenad? The human I get, but sushi is a dao, without centralized entity isn’t it.

I understand if they go for Jared, but how are they trying to get the dao? By pressuring us with going after Jared?

I got no letter in my mail and I am the Dao just like all the other members. (Wouldn’t be my jurisdiction anyway, who decides to dedicate their life to crypto and chooses to live in US lol)

On the question of funding: Depends on which school we follow. Should we move onto the territory of the old power to fight our fight? Generally probably not. Will we do it anyway for saving our pioneers asses (and their lackin opsec) as a thank you for creating this beautiful neutral space? Probably yes.

4

I understand if they go for Jared, but how are they trying to get the dao? By pressuring us with going after Jared?

Yes. The SEC will go for easy victories and the easiest is to grab anyone on the US soil.

The simplest solution would be to make sure that Sushi DAO does not have anyone from the US involved from now on. This puts the US contributors and Sushi itself at unnecessary risk.

5

Might want to open a lobbying fund as well to get regulatory clarity on DAO’s. Re domiciling in a different jurisdiction won’t help. The US gov will still come for DAO’s if they decide to.

6

Re domiciling in a different jurisdiction won’t help. The US gov will still come for DAO’s if they decide to.

The SEC is not all-powerful. They need to pick their battles as well. Going after offshore public figures, especially in crypto-friendly jurisdictions, is much harder than grabbing a local person.

2 Likes
8

Just curious, what is the plan to enforce this?

Everyone who works for Sushi could voluntarily step down from their roles. Then new replacing staff would be elected.

Gary and Mr Burns from Simpsons have some similarities in their character. I don’t believe anyone wants to deal with him voluntarily.

9

There are worse ways to spend the DAO’s Arb airdrop. :sweat_smile:

image

1 Like
10

While I fully understand and respect your position, please consider posting their subpoena and claims to help expose the SEC’s lawlessness. The industry and citizens of the US cannot fight something they cannot see.

4 Likes
11

Can we see the subpoena?

Maybe it makes sense to just OTC $3M in ARB?

1 Like
12

Why not cover past employees when you are going to cover future terminated and resigning employees?

Either both or none should be covered.

1 Like
14

Doesn’t seem like there’s much insight or visibility into prior conduct. Strange why this step wasn’t taken to inform the DAO previously for things like this. IIRC the old invoicing spreadsheet had 250k retainer payments to law firms regularly without communication to the DAO.

1 Like
15

A couple of things.

  1. Although I’m not actually a Multisig signer yet (only voted on, not actually on multisig), I think a Legal Defense Fund should also apply to those on the multisig.

We do not have Director & Officers liability insurance and cannot offer it without having a legal structure. I suspect multi-signers can also be targeted by regulators.

  1. We should make any documentation from regulators visible and available to the community. The SEC is a civil enforcement regulator, not a criminal investigative arm. Transparency is key. If they are coming after our head chef or core contributors for some alleged “wrongdoing” the community needs to see what those allegations are.

For those reading this comment. Let me be clear that I am NOT accusing head chef or core contributors of wrongdoing. I’m using this as one example.

In the real world, a Legal Defense Fund would likely have some limitations for gross negligence or illegal activities. I would expect Sushi to set some limitations for our Legal Defense Fund. We don’t want to be responsible for defending 25-35 individuals for any and all actions they take.

4 Likes
16

Who was treasurer processing the retainer? Presumably team members had to do this?

2 Likes
17

Can you clarify this for me please? Is it suggesting that there will be a 1m top-up for the legal fund without limits?

2 Likes
18

Hi, the limit would extend to the conclusion of the legal matter(s).

19

So hypothetically this could allow all treasury funds to be spent on the legal defence fund?

Who would have discretion to top it up?

1 Like
20

With respect, I think that’s a bit dramatic. As a community, the DAO can decide if a cap should exist or if an open-ended “top-up” is best. The proposal is a suggested framework based on the precedent set by MakerDAO, with considerations unique to Sushi DAO.

1 Like
22

Post the subpoena, the community deserves to know. Plus, it’ll help to generate further press for Sushi and wider support from the Defi community depending on what is stated in it.

Otherwise, how do are we supposed to fund something we know nothing about?

6 Likes
23

Unfortunately, I cannot speak publicly more than what was disclosed in the post, which is standard. Many DAOs will need or have implemented Legal Defense Funds for contributors.

1 Like