Uniswap, Andreessen Horowitz and Paradigm face a class-action lawsuit over "rampant fraud" on the decentralized exchange — Crypto Twitter disagrees.
The plaintiff, North Carolina resident Nessa Risley, also accuses Paradigm, Andreessen Horowitz and Union Square, who were all "well aware" of what is going on on Uniswap, according to the 68-page lawsuit.
The lawsuit claims Uniswap generates "vast profits" by charging a fee on every trade, simultaneously benefiting the other defendants by allowing them to issue tokens. Furthermore, Uniswap is accused of "encouraging" fraud because of its fee structure. The issuance of "thousands of scam tokens" linked to "rug pulls" and "pump-and-dump" schemes facilitated the fraudulent conduct of Uniswap.
Uniswap Labs told crypto news outlet The Block that the “allegations are meritless and the complaint is riddled with factual inaccuracies. We plan to vigorously defend against this suit.”
As "investment contracts," tokens are securities under federal law, and issuers are required to file registration statements for each of them. Consequently, investors would have received disclosures that allow them to assess the risk involved with investing in each token. The lawsuit states: "Without these disclosures, they were left to fend for themselves."
Uniswap was a facilitator in this whole system, according to the lawsuit, profiting from the listing of many of the "unregistered securities" by raking in transaction fees. The lawsuit concludes:
"Defendants have profited handsomely from this unlawful activity, as have the Issuers to whom Uniswap paid hidden and exorbitant fees. Meanwhile, unsuspecting users on the other side of these fraudulent transactions were left holding the bag."
Lawsuit Not Telling Us Anything New
He correctly pointed out that the named tokens were not quite high-quality investments that you would need a risk disclosure for:
It is unclear thus far whether the proposed lawsuit will be successful or have an effect on the issuance of new "shitcoins." However, investors are, in any case, best off thoroughly assessing what tokens they invest their money in — risk disclosure or not.