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Decentralized Exchange Uniswap, faces lawsuit for selling unregistered securities

Uniswap, a leading decentralized exchange, faces a lawsuit over the sale of unregistered securities. The DEX is also being accused of the sale of unregistered securities and for failing to inform users about the risks associated with their investments.

Uniswap sued for selling unregistered securities

The lawsuit against Uniswap was filed by Nessa Risley on April 4. Risley is a Uniswap user based in North Carolina who invested around $10.400 on low-cap cryptocurrencies, including Samurai, Rocket Bunny and EthereumMax. The trader has witnessed major losses from investing in these tokens and has filed a lawsuit against Uniswap.

In the lawsuit, Risley said that Uniswap failed to verify identities and failed to restrict fraudsters using the DEX to list digital tokens promoting scams and fraud. The lawsuit is being handled by US firms that invite other victims who lost money on Uniswap to join.

The lawsuit is not just for Uniswap but the investment firms backing it, including Paradigm and A16z. The law firms claim that the companies violated “the securities laws by offering and selling securities in the form of digital tokens.”

Uniswap is being accused of failing to disclose registration details such as the risks associated with the offered investments. It is also being accused of failure to prohibit pump and dump techniques and rug pulls on the platform. The platform’s fee structure is also associated with the rampant fraud levels.

Uniswap charges fees for developers, and it maintains a percentage of these fees. The conflict of interest makes it difficult for Uniswap to be vigilant in stopping the scams.

SEC is also keen on Uniswap

Uniswap is one of the largest projects in the decentralized finance (DeFi) sector. However, over the past year, it has been under regulatory scrutiny. In September 2021, the SEC started an investigation into Uniswap.

The investigation wanted to assess how customers were using the exchange, its marketing techniques, and how it operated. The SEC chair, Gary Gensler, has been keen on the operations of DeFi platforms, saying they needed to be regulated.