Sushi, the developer of Ethereum-based decentralized exchange (DEX) SushiSwap, revealed on Tuesday that it had been subpoenaed by the Securities and Exchange Commission (SEC), suggesting it could face regulatory enforcement action soon.

Sushi CEO Jared Grey broke the news as he submitted a proposal to Sushi DAO, which would see a legal defense fund established to shoulder legal costs. Grey said the company was already cooperating with the regulator.

Following the Subpoena news, the DEX’s native token, SUSHI, shed 6% of its value, declining from $1.3 to $1.12 within an hour, as per CoinMarketCap data.

The SEC’s regulatory attack on Sushi is the latest enforcement action taken by the agency. In recent weeks, the regulator has sued Terraform Lab founder Do Kwon for allegedly committing securities fraud and fined crypto exchange Kraken for offering an unregistered staking product.

Grey’s proposal to DAO seeks $3 million in USDT for the legal fund and another $1 million for the emergency fund in case the initial funds get exhausted.

Did SEC Target Sushi DAO Members or the Founder?

At press time, over 900 Sushi DAO members had viewed the proposal, with one member wondering if the subpoena sent to Grey was meant to level an enforcement action against the DAO.

If that’s the case, this wouldn’t be the first a US regulator has taken aim at a DAO. In September 2022, the Commodity Futures Trading Commission (CFTC) announced that it had filed a lawsuit against the organization behind the decentralized finance project Ooki Protocol, Ooki DAO.

That CFTC’s move gave rise to several legal questions for DAO members and DeFi founders. Last December, however, a California-based court determined that only specific individuals in a given DAO are to be served by regulators, not the entire DAO. In Ooki’s case, for example, CFTC should have summoned DAO founders only.

That said, as of Wednesday, the SEC had not clarified whether it delivered the subpoena to Sushi DAO or Grey.

The SushiSwap DEX

SushiSwap is currently the 14th largest decentralized exchange by daily trading volume. CoinGecko data shows that the DEX has posted a trading volume worth $33 million in the past 24 hours. As of this writing, its most traded pair is Umbrella Network and Wrapped Ethereum.