A US judge has dismissed a class-action lawsuit against DeFi crypto lender Maker alleging the platform unfairly exposed investors to risk, causing a devastating loss of collateral on MakerDAO in 2020. Happened.
according to a court documents Filed on Wednesday, the “Black Thursday” lawsuit has been dismissed because the Maker Foundation, which built the Maker Protocol and initial supply of tokens, has been dissolved and is no longer a “proper defendant.”
Established in 2018, the Maker Growth Foundation announced that it is handing over operations entirely to its own decentralized autonomous organization (DAO), MakerDAO, in 2021. This move was always part of the protocol’s roadmap to fully adopt decentralization.
The judge also argued that “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 investors’ risks in the ecosystem.
The complaint states that holders of collateralized loan positions lost $8.325 million when the value of the Ethereum that was held as collateral fell relative to DAI, the dollar-pegged stablecoin in which they were loaned.
The lawsuit, which named Peter Johnson as lead plaintiff, alleged that the foundation failed to properly warn about such risks. It said:
“By misrepresenting to CDP holders the real risks they faced, the Maker Foundation neglected its responsibilities to its investors, or at least allowed the conditions that led to Black Thursday , all after actively seeking millions of dollars of investment into its ecosystem.
At the time, Johnson said he was seeking damages “in an amount to be proved at trial but not less than $8.325 million and punitive damages in an amount not less than $20 million”.
Maker is a leading DeFi lending protocol that allows users to withdraw loans in DAI, the native stablecoin of the platform, by pledging certain cryptocurrencies like ETH as collateral.
Borrowers must maintain a certain collateral level to avoid liquidation. To combat volatile crypto prices, Maker required loans to be over-collateralized, meaning borrowers would have to lock up a higher value of assets than their loans.
On March 12, 2020, a massive drop in the price of ETH resulted in large amounts of tokens being sold for free in major debt auctions as the lack of competition allowed some bidders to win the liquidation auction in exchange for 0 DAI.
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