Judge Clears Uniswap of Wrongdoing in Class Action Suit
- Uniswap V3 has recorded over $7 billion in trading volume over the past 30 days.
- Judge Falia ruled that Uniswap could not be held responsible for the losses suffered by the plaintiff.
A district judge has dismissed a class action lawsuit against Uniswap and concluded that persons connected to the decentralized exchange were not responsible for the fraudulent tokens that allegedly burned investors.
Nessa Risley, a trader, filed the complaint in April on behalf of other Uniswap customers and claimed that the investors and creators of the decentralized exchange had violated securities laws. The suit also claimed that Uniswap issued unregistered securities, operated as an unlicensed broker and dealer, and enabled token issuers to defraud users.
Southern District of New York Judge Katherine Polk Failla dismissed the case. She noted in her ruling that neither party was aware of the identity of the scammers, and instead of bringing an unlawful solicitation claim against the token issuers, the plaintiffs sued Uniswap for a comment it made on social media.
The judge wrote that:
In a perfect (or at least, a more transparent) world, plaintiffs would be able to seek redress from the actual issuers who defrauded them. In the absence of such information, plaintiffs are left to argue that [Uniswap Labs] facilitated the trades at issue.
Judge Falia also ruled that Uniswap’s ability to levy transaction fees wasn’t sufficient to hold the platform’s associates liable.
“The Court declines to stretch the federal securities laws to cover the conduct alleged and concludes that plaintiffs’ concerns are better addressed to Congress,” she wrote.
Judge Falia also ruled that the code underlying liquidity pools, which are put together by token issuers and allow the trading of newly created tokens, should be addressed separately from the smart contracts supporting Uniswap’s fundamental operations.
Judge Falia also used prominent payment apps Venmo and Zella as examples to illustrate her view. She claimed that the plaintiff’s case was akin to seeking to hold the payment firms accountable for an illegal drug deal that used the apps to transfer funds.
In support of her position, the judge also highlighted the unsuccessful class action filed in 2022 against Coinbase for the sale of unregistered securities. She dismissed the case with prejudice, which prevents a retrial.
The crypto community hailed Judge Falia’s ruling, noting that it showed a great understanding of the DeFi landscape.