The Southern District Court of New York dismissed the class action lawsuit against Uniswap and founder Hayden Adams, ruling that as a decentralized protocol, it is not responsible for third-party fraudulent tokens; the same judge previously participated in the ruling involving Tornado Cash developers in relation to illegal money transmission, highlighting the regulatory rigidity regarding 'traceability': allowing decentralization but refusing untraceable privacy tools.
Author: Eric
Source: Foresight News
On March 3 at midnight Beijing time, a class action lawsuit demanding Uniswap and its founder Hayden Adams be held accountable for fraudulent tokens on Uniswap was dismissed by the Southern District Court of New York. Brian Nistler, Chief Legal Officer of the Uniswap Foundation, referred to it as a 'milestone ruling for DeFi.'
Hayden Adams also tweeted, "If you write open-source smart contract code and that code is used by scammers, the ones held responsible are the scammers, not the open-source developers. This is a reasonable and fair outcome."
For developers in Web3, this is undoubtedly good news. But little known is that the judge who made this "just ruling" and the one who found Tornado Cash developers guilty during the tenure of the former SEC chairman is the same person.
The verdict is settled.
Nearly four years have passed from the time the class-action lawsuit was filed against Uniswap until today when the dust has settled.
In April 2022, Uniswap users represented by Nessa Risley filed a class-action lawsuit against defendants including Paradigm, a16z, Uniswap, and its founder Hayden Adams, alleging violations of federal securities laws by issuing and selling unregistered securities, including UNI, in token form on Uniswap. Furthermore, the defendants failed to register Uniswap as an exchange or broker-dealer under applicable securities laws and did not provide investors with registration statements for the securities they issued and sold.
This lawsuit was initiated by the law firms Kim&Serritella and Barton, representing users who traded EtherumMax, Bezoge, MatrixSamurai, Alphawolf Finance, RocketBunny, and BoomBaby.io tokens on Uniswap between April 5, 2021, and April 4, 2022.
The phrase "unregistered securities" had an extraordinary destructive power on the crypto industry at that time, but this lawsuit surprisingly tilted quickly in favor of Uniswap.
Presiding judge Katherine Polk Failla believed that the plaintiffs' claim that the "fraudulent tokens" are indeed securities, but concluded that Uniswap does not need to be held responsible. Failla believed that the decentralized nature of Uniswap means that the protocol cannot control which tokens are listed on the platform or who can interact with it, "the case is more like holding the developer of an autonomous vehicle responsible for third-party traffic violations or bank robberies committed using that vehicle."
Accordingly, Failla dismissed the federal securities law charges in August 2023, after which the plaintiffs appealed, and the Second Circuit Court of Appeals confirmed in 2025 the dismissal of the federal portion but remanded the state law portion for reexamination.
Subsequently, the plaintiffs amended the complaint and filed again. This time, the investors who lost money accused Uniswap and other defendants of aiding and abetting fraud and false statements and profiting from the trading of fraudulent tokens, in addition to violating several state fraud laws.
After another review by the same judge Failla, the modified lawsuit request was dismissed again, and no further amendments were allowed, effectively ending the case.
The reasoning given by the judge this time is basically the same as last time: Uniswap was not aware of the situation regarding fraudulent tokens, and even if it was aware, it did not provide substantial assistance, nor does it meet the definition of fraud under any state law. In terms of unjust enrichment, Uniswap did not obtain any direct benefits, and the idea that such fraudulent projects expanded the user base and brought indirect benefits is too speculative.
Brian Nistler stated in a tweet that, quoting a line from the previous ruling, the drafters of smart contracts must bear responsibility for the misuse of the platform by third-party users, which is simply "illogical."
Another outcome for Tornado Cash.
Facing the same judge, Tornado Cash's Roman Storm has a different outcome.
Tornado Cash was first added to the sanctions list by the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) on August 8, 2022, accused of aiding criminals, including North Korean hackers, in laundering over $7 billion. Just two days after being placed on the sanctions list, Dutch police arrested Alexey Pertsev, one of the core developers of Tornado Cash.
On May 14, 2024, a Dutch court ruled that Alexey Pertsev was guilty of money laundering and sentenced him to 64 months in prison. The court found that Pertsev was aware that the platform he developed and operated was used for criminal activities but did not prevent it, tacitly allowing Tornado Cash to be used as a money laundering tool. Alexey Pertsev is still in the process of appealing, but there has been no latest progress.
Seven months before Alexey Pertsev was found guilty, the U.S. Department of Justice filed charges against two other developers, Roman Storm and Roman Semenov, in the Southern District Court of New York. Roman Storm was previously arrested in Washington State, while Roman Semenov is still at large.
Roman Storm appears in court.
Subsequently, although after the appeal, the French court determined that OFAC's sanctions against Tornado Cash were overreaching and invalid. However, Roman Storm still found himself in the defendant's seat last July. After a trial by presiding judge Katherine Polk Failla, the jury found that Roman Storm "intentionally operated an unlicensed money transmitting business," but as of now, he has not been formally sentenced.
Under Brian Nistler's tweet celebrating Uniswap's victory, a tweet by Sigil developer tim-clancy.eth criticizing the contradictory ruling by Failla (the verdict regarding Roman Storm was indeed made by the jury) received the highest number of likes among all comments.
Decentralization is possible, but privacy is not.
The author is not a professional lawyer, but putting aside political factors and from a simple emotional perspective, one can understand why Uniswap and Tornado Cash have different outcomes.
The core reason is that the developers of Tornado Cash should be well aware that mixers will definitely be used for money laundering. This also clearly reveals the attitude of regulators: decentralization is acceptable, but it must be traceable. Tether has also faced the same dilemma, which is why it later began to cooperate with money laundering investigations and added the freezing function.
Perhaps Roman Storm feels injustice upon learning today's verdict from behind bars, but he should realize that even in crypto-friendly America under Trump, a platform that helps state-sponsored North Korean hackers launder money cannot be tolerated. With the current power of crypto, it is still not strong enough to combat the power of the state.
Practitioners in Web3 speak out for the developers of Tornado Cash and cheer for Uniswap's victory. Because in our eyes, the two protocols are not fundamentally different; in fact, Tornado Cash excels in privacy protection. Uniswap's addition of front-end blocking for sanctioned addresses in 2022 sparked some controversy, but it now appears that permissionless operation within the existing legal framework may be the only way for decentralized protocols to survive.
But the question remains: does Uniswap have no responsibility at all in these fraud incidents?
Strictly speaking, as the judge's analogy indicated, you cannot hold Mercedes responsible for bank losses just because a robber drove a Mercedes to rob a bank. However, on a business level, we are more inclined to believe that giants should provide protection within their capacity. Today's security tools are already capable of identifying a large number of potential scam projects in advance, and for these established projects that have reaped the benefits of Web3's development, simple screening is not troublesome.
It is not a necessary obligation to do one's part to protect investors, but it is a responsibility that ordinary investors hope Uniswap can proactively take on.