\n<\/p>\n
Two U.S. law firms have invited<\/a> anyone who lost money on Uniswap since last April to join a class action suit against the exchange\u2019s developers and investors for failing to crack down on \u201crampant fraud\u201d.<\/p>\n On April 4, Nessa Risley of North Carolina filed a lawsuit<\/a> alleging that the decentralized exchange\u2019s lack of identity checks and securities restrictions lets fraudsters list \u201cthousands of scam tokens\u201d associated with rug pulls, pump and dumps, and Ponzi schemes on the platform.\u00a0<\/p>\n More than that, the lawsuit, filed by US firms Barton LLP and Kim & Serritella LLP<\/a>, alleged that Uniswap\u2019s fee structure<\/a> encourages<\/em> fraud by paying liquidity providers guaranteed fees for every trade. Meanwhile, investors \u201cwere left to fend for themselves,\u201d it says.<\/p>\n Risley spent about $10,400 on low capitalization altcoins between May and July of last year. In the same period, the total crypto market cap lost half of its value. Risley cites \u201csubstantial losses\u201d in EthereumMax, Matrix Samurai, Rocket Bunny, Alphawolf Finance, Bezoge Earth, and BoomBaby tokens.<\/p>\n Risley\u2019s suing Uniswap Labs, its founder, Hayden Adams, and investors A16z, Paradigm, AH Capital Management, and Union Square Ventures. The lawsuit accused them of abetting Uniswap\u2019s \u201cfailure to register as an exchange or broker-dealer,\u201d and selling unregistered securities.<\/p>\n The lawsuit marches straight past Uniswap\u2019s claims of decentralization. The Uniswap protocol comprises permissionless smart contracts that anyone can interact with, meaning that Uniswap can\u2019t restrict who can use the protocol, or which tokens users trade on its exchange.\u00a0\u00a0\u00a0<\/p>\n Uniswap can only control its front-end website. Last year, Uniswap Labs restricted<\/a> access to synthetic stock tokens on its website, citing \u201cthe evolving regulatory landscape.\u201d<\/p>\n Risley\u2019s complaint alleges that Uniswap and its investors \u201care well aware of the fraud perpetrated on the Exchange, but have done nothing to stop these activities\u201d The complaint seeks to represent everyone who purchased tokens on the exchange from April 5, 2021 to April 4, 2022.\u00a0<\/p>\n The lawsuit is not the first to challenge the decentralization of a DeFi protocol. In January, a disgruntled depositor filed<\/a> a complaint against gamified crypto savings protocol, PoolTogether, claiming the protocol operates an illegal lottery. The SEC also launched an investigation<\/a> into Uniswap last September.<\/p>\n A court may end up deciding whether Risley should have taken greater care with her investments. Popular crypto commentator \u2018Cobie\u2019 tweeted<\/a> said that BoomBaby\u2019s website \u201cdoesn\u2019t even work,\u201d Rocket Bunny\u2019s maximum supply is a staggering 777 quadrillion, and Matrix Samurai\u2019s core use-case is \u201ca token for shilling a shilling service.\u201d<\/p>\n<\/div>\nDecentralization Challenge<\/h4>\n