DAO1, a company promoting itself as decentralized, has launched "DAO1 Lite," a new platform that centralizes user funds under company control. This move comes as DAO1 faces regulatory pressure in the United States and fraud warnings from Australia and New Zealand. The company claims DAO1 Lite will lower entry barriers for new cryptocurrency investors.

DAO1 Lite allows users to sign up with just an email and password. Instead of requiring users to manage their own crypto wallets, DAO1 handles all transactions through an "auto-generated custodial wallet." This means DAO1, led by owner Josip Heit, will hold and manage private keys for users, effectively controlling their assets.

This shift to a custodial model complicates DAO1's claims of decentralization, particularly in light of the Howey Test. The Howey Test defines an investment contract as an investment of money in a common enterprise with a reasonable expectation of profits derived from the efforts of others. By taking direct control of investor funds through DAO1 Lite, DAO1 strengthens the "common enterprise" element of this test.

DAO1's crypto operations are managed through Apertum Foundation, with the same individuals reportedly behind both entities. The company has also been offering "rolling discounts" to investors, a strategy seen in collapsing companies like GSPartners and G999. When DAO1 and Apertum eventually fail, funds held in DAO1 Lite custodial wallets will likely disappear along with the company, increasing risk for consumers.