Judge Upholds Freeze on SpartacusDAO’s $35M in Lawsuit Served Via Discord, NFT

A federal judge is upholding the freeze on $35 million in crypto assets held by SpartacusDAO, a crypto investment project whose leader is facing a lawsuit from disgruntled investors in the SPA token.

Judge Victor Marrero upheld his previously signed restraining order against Wei Wu, allegedly the man behind Spartacus, in a hearing in the Southern District of New York on Thursday. Marrero said the order will remain in place until Wu, who has been absent, begins working with the court, said Diogenes Casares, CEO of the investment firm suing Wu.

The courtroom decision marks the latest chapter in a multimillion-dollar battle over the future of SpartacusDAO and SPA tokens.

SPA investors unhappy with the progress of the crypto-yield project staged a vote last year to dissolve the DAO and return the value to token holders. But Spartacus has ignored their non-canonical proceedings – the vote did not take place on SpartacusDAO’s traditional governance platform – and pressed on.

In the midst of all this, Patagon Management LLC, a proprietary crypto trading firm, claims that Spartacus wronged investors by holding his own token redemption program that he led for $4.3 million in profits. In the lawsuit against the DAO leader, the prop trading firm also alleges violations of securities laws and shareholder obligations.

Late last month, a lawyer representing Patagon Spartacus, whom they identified in court papers as Wei Wu, informed the project’s town hall of a lawsuit with legal papers posted on SpartacusDAO’s Discord server. Within minutes, the post was deleted and the attorney was banned, according to court documents.

The back-and-forth highlights the challenges and also the opportunities of conducting legal business in crypto’s digital native realm, where defendants can be more easily located on Twitter, Discord and governance forums than the meat realm.

“Especially in the crypto space, people have to take what they can get, and if the only manifestation of a party that wronged you is through a Discord server, well, that’s where you have to go” to serve them, said Nelson Rosario, a lawyer who works with crypto.

SpartacusDAO is a crypto yield project and Ohm fork whose treasury has attracted activist investors seeking to redeem their SPA tokens for the treasury’s underlying assets. According to Patagon, Spartacus has absolute power over the treasury and ignores the demands of governance owners. Last year he organized – and front-runner – his own token redemption program, but is now ignoring a community vote to hold another.

Spartacus “fell off the map last year. And we couldn’t find a place to serve him,” Casares told CoinDesk in a phone interview. He said he connected the pseudonymous Spartacus to the real-world identity Wei Wu by cross-checking a number of Internet records .

After private investigators got cold feet and an e-mail message went unanswered, Casares said his team turned to Discord as a last resort. If Spartacus not only ignored but deleted the notice there, he said, then he might be held in contempt of court.

“It’s the same way that if you serve somebody, put the letter on their doorstep with a giant thing that says ‘this is a legal letter’ and then they throw it out – that’s contempt of court,” he said.

In fact, the letter was deleted, and neither Spartacus nor Wu have formally responded to the allegations. Patagon’s lawyers pulled a new legal trick Wednesday, attempting to serve the defendants via an NFT.

Wu did not immediately respond to a request for comment from CoinDesk.