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Will The DAO Lead To Legal Trouble For Every Investor?

Avatar newsbtc 4 years ago

Despite the overwhelming success of The DAO so far, a lot of people are still unable to wrap their head around the concept. However, the project has attracted thousands of investors around the world, which is a feat that should not be ignored. But does the idea make enough sense to every investor to justify the involvement?

Making Sense of The DAO As An Investor

One of the more prominent risks of crowdfunding is how companies and projects will attract funds from people who have no idea of what they are investing in. The DAO seems to be one of those concepts, as it is incredibly difficult to explain to less tech-savvy users, and the legality of this business model remains a gray area for the time being.

While nearly every investor is confident the code behind The DAO alone is well worth the investment, that alone should not be the main reason to participate in this crowdsale. Keeping in mind how this project will invest the collected funds into other startups, the world of investing will be turned on its head. All of this relies on voting participation, though, which effectively requires some form of trust in other investors to make the right calls.

If successful, The DAO will indeed make history, other than the fact it is now the most successful crowdfunding project in history. By removing the human executives from the organizational structure, The DAO eliminates most fraud and corruption concerns. Empowering every single investor by giving them voting rights in a significant change in the way businesses are run, but if there not enough participation, proposals will never be approved.

Perhaps the biggest concern is whether or not an investor involved in The DAO could face legal trouble in their country of residence at some point. If the project goes awry, everyone who has ever promoted The DAO may find themselves in the crosshairs of regulators and policymakers.

Lawyer Patrick Murck told the media the following:

“You can’t code away your legal responsibilities. This is something that has been tried before and has failed before. Even if an investor is not operating the venture itself, he or she may face legal liability for their involvement in this investment scheme.”

But that is not the only potential problem as many people feel the code used for The DAO is not without flaws. This concept has not been tested as thoroughly as other Ethereum-based projects, and only time will tell whether or not the developers did a good job. Given the amount of money invested into this project already, many investor has overseen these potential issues by the look of things.

Source: New York Times

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