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A DAO is a decentralized organization, typically powered by cryptography. It works much like a business, but without borders. Although a DAO typically receives instructions from its stockholders, it is ultimately controlled by its code.

One particular DAO, ominously known as The DAO. It's mission statement:

The DAO’s Mission: To blaze a new path in business organization for the betterment of its members, existing simultaneously nowhere and everywhere and operating solely with the steadfast iron will of unstoppable code (emphasis present in original source).

It already controls at least $20 million worth of assets, and it hasn't even started doing stuff yet!

My question is, what happens if The DAO or some other decentralized organization breaks the law? For example, what if it breaks contracts, breaks copyright law, doesn't pay taxes, hires assassins or jay walks?

  • Would its shareholders be punished?
  • Would its contractors (people it pays in the real world to do its dirty work) be punished?
    • Note that it could still theoretically do things like commit financial fraud (such as ponzi schemes) without requiring contractors.
  • Would people involved in the crypto systems allowing it to exist be punished (in the case of The DAO, ethereum miners).
  • Would the original programmer be punished?

Note: I'm not saying The DAO or any other decentralized organizations will break the law. The DAO is even thinking of donating money to charity, which quite a nice thing.

I guess practically a problem that might arise is that these things often operate internationally, and so if the values of the stockholders are based on one jurisdiction, and they don't really care about complying with the laws of other jurisdictions, you would have a problem (especially if they knew that there was nothing that those other jurisdictions could do about it).

  • I think the actual person(s) breaking the law would be prosecuted. If I join an organization like Anonymous and other members of Anonymous break the law, why should I be punished for somebody else's actions? – RichS May 28 '16 at 16:24
  • Interesting material you have there! You have to analyze the real life impact irrespective of the underlying technology or concept. Indeed as the other comment mentionned, it's the people carrying out instructions who could break the law. Nevertheless, if a DAO were interfaced with real life impacting systems for carrying out the result of the execution of a smart contract (a program) for instance, well, who knows that may be happening this very minute. I suspect this will become a hot topic at some point. Cheers! – user2822 Oct 31 '16 at 15:03
  • Without knowing more details about the exact place in which it is organized and detailed technical terms of its legal documents, it is probably hard to know. Some activities could expose everyone to RICO violations, in other contexts, corporate limited liability principles might apply. – ohwilleke Feb 8 '17 at 7:20
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The private organizations, in difference to international organizations (the organizations, members thereof are the countries) or the countries are not subjects of international law. They are also not a subject of criminal laws, so they technically can't break the law. The people can.

If the actions of such organizations will break some laws, the people staying behind that organization will be made responsible. Either it will be single individuals, or the whole organization might be declared criminal (such as mafia or a gang) and there everyone, including stakeholders or casual employees/contractors might be subjects to interrogation, arrest and sentence.

As for the problem you describe, when the organization made something illegal under one jurisdiction, and the stakeholders are sitting in other country, where such actions are not illegal, they might only partially be safe. They might be arrested not only in the country where the legal actions are taken, but also in third countries, that have extradition agreements with that country.

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