The DAO behind DeFi protocol SushiSwap has called for the creation of a $3 million legal defense fund.
In a March 21 proposal on the platform’s governance forum, SushiSwap’s head chef Jared Grey disclosed that he and Sushi were served subpoenas from the U.S. Securities and Exchange Commission (SEC).
He did not reveal the reason behind the regulator’s inquiry, merely stating that the team was “cooperating with the SEC.”
“We do not intend to comment publicly on ongoing investigations or other legal matters,” he said.
Grey proposed setting up a fund to cover legal costs for core contributors, in addition to the $100,000 that had already been set aside last year. The legal defense fund would consist of $3 million worth of USDT which will reside in a new multi-sig wallet that will make funds available as needed.
Half the funds will come from Kanpai, Sushi’s fee-diversion protocol, 35% will come from grants and 15% will come from selling SUSHI through TWAP (time-weighted average price) market orders.
“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,” said Grey.
If legal proceedings drag out to the point that all funds are depleted, the proposal calls for $1 million worth of USDT to be topped up by the DAO. When asked whether this meant that treasury funds could potentially be diverted to this fund, Grey said it was up to the community to decide whether the fund should be capped.
“The proposal is a suggested framework based on the precedent set by MakerDAO, with considerations unique to Sushi DAO,” he said.
At the time of writing, 81% of voters were in favour of establishing the legal fund. Still, some initial comments from respondents on the forum questioned how the SEC could subpoena a decentralized entity like the Sushi DAO.
Others suggested allocating the 4 million ARB tokens that Sushi would be entitled to receive from the Arbitrum airdrop instead of the existing proposition to raise funds.