• A US judge has dismissed a class-action lawsuit against DeFi crypto lender Maker.
• The complaint alleged that the platform misrepresented risks investors faced, leading to catastrophic losses of collateral on MakerDAO back in 2020.
• The judge argued that the plaintiff failed to allege facts sufficient to support each of his claims for relief.
US Judge Dismisses $28M Lawsuit Filed Against DeFi Giant Maker
A US judge has dismissed a class-action lawsuit against DeFi crypto lender Maker that alleged the platform misrepresented risks investors faced, leading to catastrophic losses of collateral on MakerDAO back in 2020. According to a court document filed on Wednesday, the “Black Thursday” lawsuit has been dismissed because Maker Foundation, which built the Maker protocol and created the initial supply of tokens, has been dissolved and is no longer “a proper defendant.”
Background: Maker Growth Foundation
Set up in 2018, the Maker Growth Foundation announced it is turning over operations entirely to its decentralized autonomous organization (DAO), MakerDAO, in 2021. The move was always part of the protocol’s roadmap in a bid to fully embrace decentralization. The judge also argued that the “plaintiff has failed to allege facts sufficient to support each of his claims for relief.” This was the second amended version of the complaint.
As reported, investors filed a class-action lawsuit against the Maker Foundation in March 2020, claiming that the company misrepresented risks investors faced when engaging with their ecosystem. The complaint said that collateralized debt position holders lost $8.325 million when Ethereum held as collateral plummeted relative to DAI (dollar-pegged stablecoin). Johnson asked damages “in an amount not less than $8.325 million plus punitive damages in an amount not less than $20 million” at that time.
Maker Protocol Overview
Maker is a leading DeFi lending protocol that allows users to withdraw loans in DAI by pledging some cryptocurrencies like ETH as collateral. Borrowers must maintain certain level of collateral value so as not liquidated due to volatile prices; thus they have lock up higher value assets than their debt (over-collateralized).
On 12 March 2020, investors filed a lawsuit alleging risk misrepresentation by maker foundation and seeking damages for losses incurred due to ‘Black Thursday’ crash; however it was dismissed by US judge due lack evidence supporting claims. Despite this incident – maker remains one of largest DeFi protocols given its versatile features like over-collateralization & low risk levels compared other lending platforms