Uniswap secured a full dismissal in a class-action lawsuit alleging its platform facilitated fraudulent trading of tokens, closing a case that began in 2022.
In a ruling released Monday, Judge Catherine Polk of the U.S. District Court for the Southern District of New York dismissed the second amended complaint with prejudice, finding that the plaintiffs could not hold the company liable for alleged wrongdoing by third-party token issuers.
The lawsuit was first filed in April 2022 by investors who said they lost money from fraudulent anonymous tokens traded through the protocol. The plaintiffs argued that Uniswap operated as an unregistered securities exchange and broker-dealer, earning revenue from liquidity fees while allowing fraudulent tokens to circulate in its smart contracts.
Judge Failla previously dismissed the claims in August 2023. Monday’s ruling marks the final chapter, with the court finding that the plaintiffs failed to allege actual knowledge of the fraud, deceptive conduct under state consumer laws or unjust enrichment.
Comparing peer-to-peer technologies that can be used for illegal purposes, the court found that the developers of decentralized protocols cannot be held responsible for the illegal activities of third-party users.
The ruling clears Uniswap Labs, CEO Hayden Adams, the Uniswap Foundation and three venture capital backers named in the lawsuit.
After the dismissal, Adams wrote in X that the result sets a new legal precedent, arguing that if open-source smart contract code is used by fraudsters, the liability rests with the fraudsters, not the developers.
UNI, the main token of the Uniswap exchange, rose 6% on the day and was trading around $3.97 at press time, although the move was supported by Bitcoin around $69,000.
