Author: Eric, Foresight News

In the early morning of March 3, Beijing time, a class action lawsuit demanding Uniswap and Uniswap founder Hayden Adams be held responsible for fraudulent tokens on Uniswap was dismissed by the Federal District Court for the Southern District of New York. Brian Nistler, general counsel of the Uniswap Foundation, called it a “landmark ruling for DeFi.”

Hayden Adams also tweeted, "If you write open source smart contract code and that code is used by a fraudster, the fraudster will be held responsible, not the open source developer. This is a reasonable and fair result."

This is undoubtedly good news for Web3 developers. But what is little known is that the judge who made this “just ruling” is the same person who found the developer of the currency mixer Tornado Cash guilty when the former SEC chairman was the chairman.

The final verdict

Nearly 4 years have passed since the class action lawsuit was filed against Uniswap until the dust settled today.

In April 2022, Uniswap users represented by Nessa Risley filed a class action lawsuit in court, accusing defendants such as Paradigm, a16z, Uniswap and its founder Hayden Adams of violating federal securities laws by issuing and selling unregistered securities, including UNI, in the form of tokens on Uniswap. and Defendants’ failure to register Uniswap as an exchange or broker-dealer under applicable securities laws and to provide investors with registration statements for the securities they offered and sold.

The lawsuit was filed by law firms Kim & Serritella and Barton on behalf of users who traded EtherumMax, Bezoge, MatrixSamurai, Alphawolf Finance, RocketBunny and BoomBaby.io tokens on Uniswap between April 5, 2021 and April 4, 2022.

The words "unregistered securities" were extremely damaging to the crypto industry at the time, but the lawsuit unexpectedly quickly fell to Uniswap.

Although the presiding judge in the case, Katherine Polk Failla, believed that the "fraud tokens" considered by the plaintiff were indeed securities, she believed that Uniswap did not need to be held responsible. Failla believes that the decentralized nature of Uniswap means that the protocol cannot control which tokens are listed on the platform or who can interact with them. "The case is more like holding the developers of self-driving cars liable for third parties using the cars to commit traffic violations or commit bank robberies."

Accordingly, Failla dismissed the federal securities law charges in August 2023, and the plaintiffs later appealed, and the Second Circuit Court of Appeals in 2025 affirmed the federal partial dismissal but remanded for retrial in the state law portion.

Later, the plaintiff amended the complaint and sued again. Investors who lost money this time accuse Uniswap and other defendants of aiding and abetting fraud and misrepresentation and profiting from transactions in fraudulent tokens, in addition to violating multiple state deceptive practices laws.

After another trial by the same judge Failla, the revised claim was dismissed again, and the prosecution was not allowed to be revised again, and the case was completely closed.

The reasons given by the judge this time were basically the same as last time: Uniswap did not understand the situation of fraudulent tokens, and even if it did, it did not provide substantial assistance. At the same time, it did not meet the definition of fraud in any state law. In terms of unjust enrichment, Uniswap has not gained direct benefits. As for the indirect benefits brought about by such fraudulent projects expanding the user base, it is too speculative.

Brian Nistler tweeted that, quoting a sentence from the previous judgment, it "defies logic" that the drafters of smart contracts should be held responsible for the abuse of the platform by third-party users.

Alternate ending of Tornado Cash

Facing the same judge, Tornado Cash's Roman Storm had a different ending.

Tornado Cash was first placed on the sanctions list by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) on August 8, 2022, accusing it of helping criminals, including North Korean hackers, launder more than $7 billion. 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 convicted Alexey Pertsev of money laundering and sentenced him to 64 months in prison. The court held that Pertsev knew that the platform he developed and operated was used for crimes, but did not stop it, and he subjectively acquiesced in Tornado Cash as a money laundering tool. Alexey Pertsev is still appealing, but there is no latest development.

Seven months before Alexey Pertsev was found guilty, the U.S. Department of Justice indicted two other developers, Roman Storm and Roman Semenov, in the Southern District of New York. Roman Storm was previously arrested in Washington state, while Roman Semenov is on the run.

Roman Storm appears in court

Afterwards, despite appeals, the French government determined that OFAC’s sanctions against Tornado Cash were ultra vires and the sanctions were invalid. But Roman Storm still found himself in the dock last July. After a trial by presiding judge Katherine Polk Failla, the jury found Roman Storm to be "conspiracy to operate an unlicensed money transmitting business", but has not yet been formally sentenced.

Under Brian Nistler’s tweet celebrating Uniswap’s victory, Sigil developer tim-clancy.eth’s tweet complaining about the inconsistency of Failla’s verdict (the verdict against Roman Storm was actually made by a jury) received the highest number of likes among all comments.

Decentralization is OK, but privacy is not

The author is not a professional lawyer, but putting aside political factors and starting from simple emotions, I can probably understand why Uniswap and Tornado Cash have different endings.

The core reason is that the developers of Tornado Cash should know that the coin mixer will definitely be used to launder money. This also clearly reveals the attitude of supervision: it can be decentralized, but it must be traceable. Tether once faced the same dilemma, so it later began to cooperate with money laundering investigations and added a freezing function.

Perhaps Roman Storm will feel unfair when he learns of today’s sentence behind bars, but he should understand that even the United States under pro-crypto Trump will not tolerate a platform that helps North Korean state-level hackers launder money. With Crypto’s power today, it is still not enough to counter the power of the state.

Web3 practitioners protested against the developers of Tornado Cash and cheered for Uniswap’s victory. Because in our eyes, there is no essential difference between the two protocols, and Tornado Cash is even better in terms of privacy protection. Uniswap's addition of front-end blocking of sanctioned addresses in 2022 has caused some controversy. Now it seems that permissionlessness under the existing legal framework may be the only way for decentralized protocols to survive.

But having said that, does Uniswap really have no responsibility at all in these fraud incidents?

Strictly speaking, just like the metaphor given by the judge, you cannot let Mercedes-Benz bear the bank's losses just because the robbers drove the Mercedes-Benz to rob the bank. But at the commercial level, we are more inclined to give giants protection within their capabilities. Today's security tools have been able to identify a large number of potential scam projects in advance. For these established projects that have taken advantage of the development dividends of Web3, simple screening is not troublesome.

It is not a necessary obligation to do your part to protect investors, but it is a responsibility that ordinary investors hope that Uniswap can take the initiative.