U.S. District Judge Katherine Polk Failla issued a ruling from the Southern District of New York with prejudice dismissing the remaining state law claims against Uniswap Labs and its founder Hayden Adams to end a four year old class action that attempted to hold the decentralized exchange (DEX) developer liable for scam tokens traded on its platform. The judge concluded that the plaintiffs failed to show any viable claim in their allegations.
Court Rejects Platform Liability Theory
The plaintiffs alleged that they suffered losses from “rug pulls” and “pump and dump” schemes due to the fact that Uniswap provided a venue where buyers and sellers could engage in fraudulent activities. The judge held that offering a venue on its own does not amount to providing substantial assistance to the actual perpetrator and reiterated her earlier holding that it is “illogical to hold the author of smart contracts liable for the misuse of that contract by another party.”
Uniswap Labs General Counsel Brian Nistler noted that “this is another precedent setting ruling in the area of decentralized finances” and that the court, once again, has ruled that developers cannot be civilly accountable for the wrongful acts of others using their open source code. Adams further stated that “when a fraudster misuses an open source smart contract, it is the fraudster who should be held responsible, not the developer.”
The case was originally filed back in 2022, and it contained federal securities law claims that were dismissed in 2023, and reiterated by the Second Circuit on appeal. The court held on Monday the plaintiffs’ claims of the defendants having actual knowledge of fraud, deceptive conduct, and unjust enrichment were not plausible , thereby bringing this saga to a close.
Market Reaction and Implications
UNI bounced over 5% to USD 4.01 as soon as news broke out, and maintained a surge along with the entirety of the crypto market. Trading at USD 3.79 at the time of writing.
