Judge Hands Win to Uniswap in Class Action Over Scams

Uniswap Labs and founder Hayden Adams have won a class action lawsuit that sought to hold them liable for scam cryptocurrencies traded on its platform, ending a four-year legal saga.

Manhattan federal judge Katherine Polk Failla dismissed a suit against Uniswap on Monday with prejudice, saying the class group can’t hold Uniswap liable for the misconduct of unknown third-party token issuers.

It was the class group’s second attempt to sue Uniswap, which amended their complaint in May to focus on claims of state-level consumer protection violations, arguing that Uniswap allowed “rug pulls and pump and dump schemes,” according to Judge Polk Failla’s order.

The group, led by Nessa Risley, first sued Uniswap, Adams and venture firms Paradigm, Andreessen Horowitz and Union Square Ventures in April 2022. Their lawsuit was dismissed in August 2023, a decision that was later upheld on appeal.

Uniswap’s Adams posted on X that the ruling was a “good, sensible outcome” that sets a new legal precedent.

“If you write open source smart contract code, and the code is used by scammers, the scammers are liable, not the open source devs,” he added.

Class group failed to claim that Uniswap helped with fraud

In her latest opinion, Judge Polk Failla said the class group had failed to adequately allege that Uniswap “had knowledge of the fraud and substantially assisted in its commission.”

She added that “merely creating an environment where fraud could exist is not the same as affirmatively assisting in its perpetration.”

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“No matter how they try to dress up their allegations, Plaintiffs are basically alleging that Defendants substantially assisted fraud by providing ordinary services that anyone could use for lawful purposes, but that some used for unlawful purposes,” the judge wrote.

“Such an argument fails for the same reasons why a bank does not substantially assist a money launderer who washes his cash through the bank’s accounts, and why WhatsApp does not substantially assist a drug dealer who coordinates a sale on its messaging service: Simply providing the platform on which a fraud takes place is not the same as substantially assisting that fraud,” she added.

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