DAOs & Piercing the Corporate Veil: Personal Liability Risks for Members
The Executive Verdict
1. The Core Definition: What is the "Veil" in Web3?
If a DAO lacks a limited liability entity (LLC/UNA), it is an Unincorporated General Partnership. Anonymity is no defense; courts serve subpoenas via NFT. Default judgments are enforced against exchange accounts.
Scenario A: Lightning electrocutes silhouetted figures (General Partnership). Scenario B: Lightning strikes glass dome protecting figures (Wrapper).
2. The Precedent: CFTC v. Ooki DAO
The Ruling: DAOs are "Persons" and can be sued. Voting members are liable for DAO violations. If you vote to authorize a hack/negligence, you are personally liable.
3. "Piercing the Veil" of a Wrapped DAO
Top reasons wrappers fail: 1. Failure to Follow Formalities (Discord instead of Minutes). 2. Commingling Assets (Treasury -> Personal Wallet). 3. Undercapitalization.
4. The "General Partnership" Nightmare: Joint and Several
Plaintiff can collect 100% of a $50M judgment from ONE wealthy member (e.g., a VC or Delegate). It is then up to that member to chase the 9,999 anons for contribution.
5. The Solution: Legal Wrapping for Decentralized Governance
Architecture A: Model Law UNA (Wyoming DUNA - Profit for purpose). Architecture B: Cayman Foundation (Ownerless - Protocol Service Provider). Architecture C: Liability Blocker (Subsidiary LLC for risky ops).
Liability Firewall. Arrows of liability shooting up are stopped by the Middle Layer (Wrapper) before hitting Token Holders.
6. The "Delegate" Risk: Professional Voters
Delegates are "Active Managers." Must demand Indemnification Agreements from the DAO's legal entity to cover legal fees if sued for good-faith voting.
7. The Corporate Transparency Act (CTA)
Anon LLCs are dead. Must report Beneficial Owners (>25% control) to FinCEN. Failure to file = Administrative Dissolution = Return to General Partnership.
8. Summary Checklist: The "Veil Integrity" Audit
1. Wrapper Verification. 2. Vote Analysis (Is entity executing?). 3. Indemnification (For Delegates). 4. UBO Compliance (FinCEN). 5. No Commingling.
🛡️ The General Partnership Trap
F.A.Q // Logical Clarification
If I hold but don't vote, am I liable?
"Likely No. Passive holding is distinct from Management. Ooki DAO targeted voters."
Can a Series LLC protect sub-groups?
"Complex. Requires strict separation of books/bank accounts for each cell. High operational burden."
Does a wrapper mean centralized?
"No. It is a "Legal Avatar" for the code to interact with the fiat world (taxes/contracts)."
Module ActionsCW-MA-2026
Institutional Context
"This module has been cross-referenced with Legal & Regulatory / Corporate Governance standards for maximum operational reliability."