Uniswap, a DeFi behemoth, is accused of marketing unregistered securities and neglecting to warn its customers about the risks involved.
Between May and July of last year, Nessa Risley, a Uniswap user from North Carolina, invested around $10,400 in low-cap digital tokens like EthereumMax, Matrix Samurai, and Rocket Bunny.
Since then, the trader has suffered "significant losses," prompting him to seek legal redress.
Risley filed the lawsuit on April 4th, stating that Uniswap failed to conduct identification checks and apply securities restrictions on "fraudsters" who utilize the platform to advertise scam-like digital tokens in order to commit widespread fraud.
Uniswap is being investigated for selling unregistered securities
Two US law firms have filed a lawsuit against Uniswap, accusing the decentralized exchange and its backers of "violating the securities laws by promoting and selling securities in the form of digital tokens," including well-known VC firms like A16z and Paradigm.
The case, filed by Kim & Serritella LLP and Barton LLP, seeks to bring victims like Risley, who have lost money on Uniswap since last April, into a class action lawsuit against the platform's founders and developers.
It claimed that Uniswap neglected to provide "registration statements," which included information about the risk of the assets they were selling to users.
Uniswap Labs has also been accused of allowing illegal practices such as "pump and dump" and "rug pulls" to take place on its platform, according to the class action.
One of the main claims is that the DEX's pricing structure encourages fraud by paying liquidity providers a percentage of the cost for each trade, according to the statement.