A DAO is funding a lawsuit against its own founding team

The Aragon DAO has passed two votes supporting a lawsuit against its founding team and funding it with $300,000.

A vote approving the proposal passed unanimously with 1.6 million governance tokens in favor, while the vote to approve the funding passed with 1.6 million tokens in favor and 1 million tokens against. In governance votes, token holders vote with their tokens — with one token equalling one vote.

The vote comes in response to a move by the Aragon Association to dissolve itself and discontinue its governance token, ANT, through redemptions for ether. It chose this plan without consulting the DAO due to legal constraints, it said at the time.

“Rather than continuing down the current path, after several months of deep introspection we have concluded that the shaky foundations underlying the current structure cannot be fixed and have been holding back the project for too long. Neither the AA nor ANT are currently suited to govern the project. A fresh start is needed and nothing short of a total reset will do,” it said.

Going down the legal route

This provoked a reaction among some ANT token holders. The recent DAO proposal aims at the decision being taken without a vote and speculates that the move could see the Aragon Association keeping $50 million.

“This proposal is to decide whether or not to start a process to go after the AA’s responsible members in order to make sure the money from investors is returned to investors and not taken by the Aragon Team into their new secretive company,” the proposal states.

The $300,000 of funding will be used for Patagon Management LLC — which describes itself on X as an investment company — to pursue legal action and negotiations with the Aragon team, the proposal adds. It notes that Patagon, owned by Diogenes Casares, has also sued Wei “Max” Wu in relation to the Spartacus DAO — which had a similar restructuring that token holders felt left them at a loss.

The funding was sent to Patagon’s wallet following the vote. It was paid in the stablecoin USDC.

“The Aragon team have no basis to block this, any excuses they use are hollow. This has not stopped them from indirectly threatening Patagon as the enforcer of the DAO in this case, and further shows their desperation,” said Patagon on X.

Other individuals will also be able to help finance the lawsuit and will receive their funds back plus 10% interest per year if the case is won, the proposal states. They will also share a 5% cut of the total funds to be handed back to token holders. If the case is lost, they won’t receive compensation.

The lawsuit will be monitored by an oversight committee made up of a representative from the investment firm Arca, crypto trader DCF God and other pseudonymous individuals who go by Wismerhill, Tedward, CM, Triangular and Yakitori.

The RFV raiders strike again

Individuals related to the potential lawsuit against Aragon and on its oversight committee have been involved in previous disputes and dealings with DAOs before.

In May, Aragon’s Twitter account claimed that its DAO was under attack by an informal group of crypto individuals collectively known as the RFV Raiders. Standing for “risk-free value,” the unifying idea is that the groups focus on shutting down DAOs and distributing the treasury among token holders — sometimes called a governance attack.

Aragon claimed its DAO was being attacked at the time by Arca and the RFV Raiders. Aragon strongly implied that Avraham Eisenberg, who took responsibility for the attack on Mango Markets, belonged to the group. It also said these members were buying up ANT tokens to use them to vote through proposals for their own purposes.

The claims focused on a Medium post by Patagon’s Casares. “While not frequently mentioned, the RFV community has broken down many DAOs, including Invictus DAO, Fei Protocol, Rome DAO, and Temple DAO. It has also partially influenced the governance of many other projects such as Redacted Cartel, Time Wonderland, and Olympus. Collectively, these protocols have Risk-Free assets in excess of $1B,” Casares said.

Aragon’s Twitter account claimed the Medium post stated that many of the investors involved had made millions of dollars by calling for the dissolution of such projects. This line does not currently appear in the post.

The Block has reached out to Arca, Aragon, Caseras and DCF God for comment.

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