DAOs and Bankruptcy
They are all the rage: People are forming decentralized autonomous organizations (DAOs) as vehicles to purchase or bid on a wide range of assets—NFL teams, golf courses, fossil-fuel companies, even a copy of the U.S. Constitution. In our previous client alerts about DAOs, we looked at what DAOs are, their tax considerations, and regulatory questions. In this, the latest edition, we are looking at DAOs and bankruptcy.
We have seen some of what DAOs can do, but what opportunities might they have to purchase assets from a distressed or defunct entity in bankruptcy? Can the benefits of using a DAO be coupled with the 363 sale process to acquire assets “free and clear” under the supervision of a bankruptcy court? What are the advantages and disadvantages associated with using a DAO? This alert will explore these issues and attempt to answer some of those questions.
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O’Melveny & Myers LLP. Published May 24, 2022.