A four-year legal fight over alleged scam tokens traded through the Uniswap protocol has reached its conclusion. On Monday, Judge Katherine Polk Failla of the US District Court for the Southern District of New York dismissed the second amended complaint against Uniswap Labs and its founder, Hayden Adams, with prejudice. The ruling bars plaintiffs from refiling the case.
The lawsuit, first filed in April 2022 by a group led by Nessa Risley, sought to hold Uniswap Labs and several venture backers, including Paradigm, Andreessen Horowitz and Union Square Ventures, responsible for investor losses tied to alleged rug pulls and pump-and-dump schemes. Plaintiffs argued that fraudulent tokens traded on the Uniswap protocol caused significant harm and that the company should bear liability.
Judge Failla rejected that theory.
In her opinion, she concluded that the plaintiffs failed to plausibly allege that Uniswap had actual knowledge of the alleged fraud or that it substantially assisted in carrying it out.
“Plaintiffs are basically alleging that Defendants substantially assisted fraud by providing ordinary services that anyone could use for lawful purposes, but that some used for unlawful purposes,” she wrote.
Court draws line between infrastructure and misconduct
At the center of the dispute stood a fundamental question for decentralised finance: whether developers of open-source protocols can face liability for how third parties use that code.
Judge Failla made clear that creating a venue where tokens can be traded does not amount to affirmative assistance in fraud.
“Merely creating an environment where fraud could exist is not the same as affirmatively assisting in its perpetration,” she wrote.
She expanded on that reasoning with a comparison to traditional services.
“Such an argument fails for the same reasons why a bank does not substantially assist a money launderer who washes his cash through the bank’s accounts, and why WhatsApp does not substantially assist a drug dealer who coordinates a sale on its messaging service,” the opinion stated. “Simply providing the platform on which a fraud takes place is not the same as substantially assisting that fraud.”
Earlier stages of the case exposed weaknesses in the plaintiffs’ claims. In August 2023, Judge Failla dismissed federal securities law allegations, citing insufficient factual support. That decision later survived review at the appellate level. Remaining state law claims returned to the district court, where plaintiffs narrowed their focus to alleged consumer protection violations in a May amended complaint.
The court found those revised arguments unpersuasive. The inability to identify specific token issuers or demonstrate that Uniswap Labs had knowledge of fraudulent conduct undercut the theory of liability.
Second attempt falls short
This marked the plaintiffs’ second attempt to hold the company accountable. The class group maintained that Uniswap allowed fraudulent token schemes to flourish. The court disagreed, stating that the complaint did not establish substantial assistance or knowledge.
Judge Failla wrote that hosting infrastructure on which misconduct occurs does not create automatic legal responsibility. The dismissal with prejudice now closes the case’s final chapter at the district court level.
The legal saga unfolded against a backdrop of scrutiny toward decentralised platforms. Regulators and courts continue to examine how existing laws apply to blockchain-based systems that operate without traditional intermediaries. This ruling adds a concrete judicial perspective to that debate.
Industry reaction and market response
Uniswap executives framed the decision as significant for the broader DeFi sector. Adams called the outcome a “good, sensible outcome” in a post on X. He added,
“If you write open source smart contract code, and the code is used by scammers, the scammers are liable, not the open source devs.”
Within decentralised finance circles, the ruling drew praise. Some founders described it as a win for developers who publish open-source smart contract code without direct control over downstream uses.
The market responded swiftly. Uniswap’s native token, UNI, rose nearly 6% to $3.92 after news of the dismissal surfaced before easing to $3.83 at press time, according to CoinGecko data.
A precedent for DeFi developers
The decision does not eliminate regulatory scrutiny of crypto platforms. Authorities continue to evaluate token offerings, protocol governance structures and consumer protection standards across the sector. Yet the ruling clarifies how one federal court views liability in the context of neutral, permissionless infrastructure.
For Uniswap Labs and Adams, the dismissal ends years of litigation risk tied to alleged misconduct by unidentified third-party token issuers. For decentralised finance developers more broadly, the opinion offers guidance on where courts may draw the boundary between writing code and participating in fraud.
As blockchain networks expand their role in financial markets, similar disputes will test that boundary again. For now, the Southern District of New York has delivered a firm answer in one of the sector’s most closely watched cases.
Oleksii Shumak
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