Bancor, a prominent decentralized finance (DeFi) player, is facing a class-action lawsuit in the U.S. District Court for the Western District of Texas.
Bancor Faces Class-Action Lawsuit
Bancor, a prominent decentralized finance (DeFi) player, is facing a class-action lawsuit in the U.S. District Court for the Western District of Texas. The lawsuit targets Bancor, its operator BProtocol Foundation, and its founders, alleging that the company deceived investors about its impermanent loss protection mechanism (ILP) and operated as an unregistered security.
The lawsuit includes charges such as violations of the Securities Act of 1933 and the Exchange Act of 1934, breach of contract, and unjust enrichment. The plaintiffs argue that they suffered losses of nearly 50% of their investments in the LP Program and are seeking restitution, damages, and interest.
Bancor, through its BProtocol Foundation, played a pioneering role in DeFi by introducing liquidity pools powered by automated market makers (AMMs) and self-executing smart contracts. However, the lawsuit alleges that Bancor's v2.1 product, which promised protection against impermanent losses, operated at a deficit, and the ILP mechanism was a false promise. The defendants are accused of attempting to mask the deficit by introducing a new product, v3, while maintaining control over the platform's operations and violating decentralized principles.
Bancor suspended its ILP in June 2022, resulting in substantial losses for investors.
