July 2024, Dough Finance — a crypto startup trading platform that made it easy to make risky bets using borrowed funds — suffered a major hack, resulting in the theft of substantial assets belonging to its users. Following the collapse of Dough Finance, the founders launched a new venture — World Liberty Financial — in partnership with Donald Trump and his three sons. One investor, Jonathan Lopez, filed a lawsuit against Herro, alleging fraud, misrepresentation, breach of fiduciary duty and violations of Florida’s securities laws. Lopez is seeking restitution, punitive damages and legal fees.
Joseph Cioffi, Davis+Gilbert’s Chief Operating Partner and Bankruptcy, Creditors’ Rights + Finance Practice Group Chair, who has worked on large crypto bankruptcies and forfeiture proceedings, was quoted extensively in Reuters. He comments on the disclaimers included on Dough Finance’s platform, whether such language could shield the company from liability, and the additional factors courts may consider in the upcoming court proceedings.
After a hack, crypto platforms and exchanges sometimes promise to make users whole, which is not always binding. “‘Make whole’ can be in the eye of the beholder,” said Joseph Cioffi.
The Dough website includes various disclaimers, but such language would not typically be enough to shield crypto companies from any liability. “Courts may look into why and how the hack occurred and any obligations undertaken by the exchange to secure the assets,” Joseph explained.
As hacks continue to occur, the outcome of Dough Finance is a stark reminder of the importance of education, vigilance and diligence when dealing with cryptocurrency.
To read more about the 2024 Dough Finance hack, read the full article below.