1inch

Author: STORM Partners

Simple Summary

Proposed services will provide 1inch DAO with comprehensive legal support to face the many challenges its decentralised nature poses. Our team will cover, among others, cross-jurisdiction regulatory compliance, contractual agreements, DAO governance framework, members’ liability, legal personality, asset protection, intellectual property, enforcement of rights and defence against external claims. Our legal representation, underpinned by community-guided Power of Attorney, is meant to ensure the DAO’s stability, efficiency and longevity.

Abstract

1inch DAO, like other decentralised organisations, encounters intricate legal challenges, necessitating legal assistance to navigate regulatory risks, protect stakeholder interests, and maintain operational resilience.

This proposal outlines the integration of comprehensive legal and compliance services provided by STORM Partners within 1inch DAO. It encompasses regulatory compliance checks, entity structuring, governance policy development, contractual support, IP protection, and legal defence against external claims.

Moreover, the Power of Attorney is introduced to authorise STORM Partners to act on behalf of 1inch DAO in legal matters while remaining subject to the community’s guidance. These measures aim to enhance safety, streamline governance processes, and foster operational efficiency, fortifying the DAO’s foundations and protecting the interests of its stakeholders.

Motivation

Legal uncertainty and ambiguity are the most significant threats to the future of DAOs. We aim to assist 1inch DAO in establishing a strong and legally sound structure to support its growth and ensure its long-term existence. Issues such as the personal liability of DAO members, the challenges of enforcing contractual rights and defending against third-party claims, the absence of a recognised legal personality, and the risky consequences of non-compliance with regulatory requirements in multiple jurisdictions only scratch the surface of the problem.

Recognising that DAOs do not exist outside the legal system is crucial. Recent court cases in the United States and Europe have clearly shown the courts’ tendency to apply traditional legal principles regarding corporate liability and regulatory obligations to decentralised entities.

While some may consider complete anonymity as a means to avoid adverse legal consequences, this approach may be suitable for those who choose to reside in the metaverse. However, an organisation with ambitions to shape the future of finance and empower individuals to take control of their wealth must confront and address its legal challenges.

The importance of legal assistance for 1inch DAO cannot be overstated, as it faces multifaceted dangers in its mission to disrupt traditional socio-economic paradigms:

• Regulatory Risks: DAOs operate in a legally uncertain environment. They can inadvertently breach complex regulations, leading to penalties, fines, or even legal actions.

• Liability Concerns: Without proper legal guidance, DAO members may find themselves personally liable for the actions or debts of the organisation, putting their assets at risk.

• Contractual Ambiguities: DAOs frequently engage in smart contracts and agreements. Legal expertise is essential to ensure these contracts are enforceable and that the DAO’s interests are safeguarded.

• Recognition as Legal Entities: Establishing legal recognition is crucial for a DAO to enter into contracts, own assets, and protect members’ rights. This often requires navigating intricate legal processes.

• Enforcement of Rights: In disputes or claims, a DAO must be able to enforce its rights effectively. Legal counsel can provide strategies and representation to ensure just outcomes.

• Complex Governance: DAOs’ decentralised governance structures need clear legal foundations to prevent disputes, uphold community decisions, and maintain order.

STORM Partners is the ideal collaborator for 1Inch DAO, thanks to its Web3-exclusive focus, tailored approach, and comprehensive legal services, providing a distinct advantage in navigating the complex and ever-evolving Web3 regulatory landscape.

Seeking professional legal guidance is imperative to mitigate these risks, ensuring that 1inch DAO can continue its mission of reshaping the socio-economic landscape while protecting its members and assets in a rapidly evolving Web3 environment.

Specification

The purpose of this engagement is to provide 1inch DAO with legal advisory services to support their activities and give effect to the resolutions passed by the community on https://snapshot.org/#/1inch.eth.

The engagement between 1inch DAO and STORM Partners will encompass a range of legal and compliance services, with detailed specifications as follows:

• Legal and Regulatory Compliance Advisory: Advice on legal and regulatory matters to mitigate risks and potential liabilities arising out of the activities of 1inch DAO in multiple jurisdictions.

• Contractual Support: Draft, review and manage all contractual agreements that are necessary to ensure the protection of the rights and interests of 1inch DAO within the context of its day-to-day operations.

• Legal Defence: Defend the rights and interests of 1inch DAO against any claims made by external public authorities or private parties.

• Enforcement of Contracts and Dispute Resolution: Assist 1inch DAO in enforcing their contractual rights and support in resolving legal disputes.

• Corporate Services: Support with the incorporation and administration of legal entities (companies and foundations) in selected onshore and offshore jurisdictions.

• DAO Governance Framework: Draft internal governance rules and policies in accordance with the decisions of the community to ensure sound, transparent and fair decision-making processes within the DAO.

• AML/CFT Compliance: Conduct KYC/KYB verifications, wallet screening, and transaction monitoring to ensure compliance with international AML/CFT standards and applicable laws.

• Privacy and Data Protection: Assist in establishing sound data protection policies and frameworks to comply with GDPR and other relevant privacy regulations.

• ** IP Protection:** Support in protecting intellectual property by registering trademarks, patents and copyrights, drafting licensing frameworks for open-source code, and defending against illegitimate exploitation of proprietary rights.

• Legal Representation towards third parties: Represent 1inch DAO as attorney-in-fact towards third parties to execute all necessary acts which may be required to make the decisions taken by the community effective.

Rationale

The decision to engage STORM Partners for legal advisory services and grant a Power of Attorney to this trusted partner is rooted in the critical need to address significant operational challenges that currently hinder the development of the 1inch DAO. The rationale behind these design decisions is as follows:

• Preserving Decentralisation and Autonomy: 1inch DAO embodies the ideals of decentralisation and autonomy, which are fundamental to its mission. These principles are of paramount importance, but they do not preclude the necessity of navigating complex legal and regulatory landscapes. Engaging STORM Partners allows the DAO to resolve operational issues without compromising its decentralised and autonomous nature.

• Effective Problem Resolution: Operational challenges, such as regulatory compliance, contractual disputes, or liability concerns, can obstruct the seamless development and operation of the project. STORM Partners’ expertise in legal matters equips 1inch DAO with the capability to address these challenges effectively. This proactive approach mitigates risks and facilitates operational efficiency.

• Enhanced Legal and Regulatory Compliance: Engaging a specialised partner like STORM Partners ensures that 1inch DAO remains in adherence to evolving legal requirements, reducing the risk of legal entanglements and liabilities. Foresighted legal advice enables 1inch DAO to anticipate regulations and their effects. This results in a substantial gain in value, as operational staff can take the upcoming legal developments into account to make in advance the best strategic decision.

• Robust Legal Representation: By granting a Power of Attorney, the DAO secures robust legal representation in external matters. This empowers 1inch DAO to protect its interests, defend against claims, and engage in legal discussions with third parties on equal footing.

• Alternate Designs Considered: Alternative approaches, such as internal legal teams or ad-hoc legal consultations, were considered. However, these approaches often lack the specialised expertise and continuous commitment that STORM Partners brings to the table. Internal teams may also divert resources from the DAO’s core mission, while ad-hoc consultations might not offer the level of comprehensive legal support required.

In summary, the decision to engage STORM Partners and grant a Power of Attorney to this trusted partner is the result of a deliberate effort to strike a balance between preserving decentralisation and addressing operational challenges. It is designed to ensure 1inch DAO’s legal and regulatory compliance while empowering it with robust legal representation, ultimately benefiting the DAO’s development and its commitment to its core principles.

Considerations

Engagement:

The community’s approval of this proposal signifies its consent to engage STORM Partners for the performance of legal advisory services. Such services shall be provided by STORM Partners Sàrl, a limited liability company having its registered address at Chemin de Madame de Warens 2, 1816 Chailly-Montreux (CH-VD), Switzerland, registered under code CHE-435.083.916, under the provisions of the General Terms and Conditions of Service available at https://storm.partners/termsandconditions/.

To commence the engagement, 1inch DAO shall pay a retainer fee equal to 50’000 USDC. The retainer fee shall cover the fees of STORM Partners and external disbursements pertaining to the performance of the mandate.

The fees of STORM Partners for the performance of legal advisory services under this engagement shall be calculated according to the following hourly rates:

• Director - CHF. 475.-
• Senior Manager - CHF. 425.-
• Manager - CHF. 375.-
• Junior Manager - CHF. 325.-
• Specialist - CHF. 250.-
• Analyst - CHF. 150.-

During the engagement, STORM Partners shall deliver a report of the activities performed for 1inch DAO at the end of each calendar quarter. The report shall include a calculation of the fees.

Upon termination of the engagement, STORM Partners shall provide 1inch DAO with a final calculation of the fees and external disbursements. Any remaining balance shall be returned to 1inch DAO. In no circumstances shall the fees of STORM Partners exceed the retainer fee.

Power of Attorney:

1inch DAO, a decentralised organisation formed by the holders of 1INCH cryptographic digital tokens (the “Principal”), hereby designates STORM Partners Sàrl, a limited liability company incorporated under the laws of Switzerland, having its corporate seat at Chemin de Madame de Warens 2, 1816 Montreux (CH-VD), and registered under code CHE-435.083.916 (the “Attorney-in-fact”), its attorney-in-fact to act as set forth below, in its name and for its benefit.

The Principal hereby appoints the Attorney-in-fact with full power and authority to act on its behalf in order to execute the decisions taken by the Principal in accordance with its governance rules, including, but not limited to:

• entering into, amending, novating, negotiating, reinstating and/or terminating contracts and/or similar undertakings binding, or granting rights to, the Principal, on such terms and conditions, including funding and credit arrangements, as the Attorney-in-fact shall deem proper;

• enforcing Principal’s rights toward third parties, including the power to settle any dispute, on such terms and conditions, including funding and credit arrangements, as the Attorney-in-fact shall deem proper;

• communicating with public and private institutions, entities, banks and/or other third parties on behalf of the Principal in any relevant jurisdiction;

• mandating external attorneys at law and/or law firms to defend the interests of the Principal, including in judicial proceedings in any relevant jurisdiction;

• performing any other action that the Principal may require the Attorney-in-fact to perform under a proposal approved in accordance with the DAO’s governance rules.

In performing the above, the Attorney-in-fact shall act solely in adherence to the resolutions passed by the community of the Principal, in accordance with its internal governance rules, through https://snapshot.org/#/1inch.eth and at all times to safeguard the best interests of the Principal.