The same judge gave Uniswap and Tornado different outcomes.

Author: Eric, Foresight News

Early morning of March 3rd, Beijing time, a class-action lawsuit demanding that Uniswap and its founder Hayden Adams be held responsible for fraudulent tokens on Uniswap was dismissed by the U.S. 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 fraudsters, then the responsibility lies with the fraudsters, not the open-source developers. This is a reasonable and fair outcome."

This is undoubtedly good news for Web3 developers.

What is little known is that the judge who made this "just ruling" is the same person who, during the tenure of the former SEC chairman, convicted the developer of the coin mixer Tornado Cash. The Dust Settles on the Court Nearly four years have passed since the class-action lawsuit against Uniswap was filed. In April 2022, Uniswap users, represented by Nessa Risley, filed a class-action lawsuit accusing Paradigm, a16z, Uniswap, and its founder Hayden Adams, among other defendants, of violating federal securities laws by issuing and selling unregistered securities, including UNI, in token form on Uniswap. The lawsuit also accused the defendants of failing to register Uniswap as an exchange or broker-dealer under applicable securities laws and of failing to provide investors with registration statements for the securities they issued and sold. This lawsuit, filed by the law firms Kim & Serritella and Barton, represents users who traded EthereumMax, Bezoge, MatrixSamurai, Alphawolf Finance, RocketBunny, and BoomBaby.io tokens on Uniswap between April 5, 2021, and April 4, 2022. The phrase "unregistered securities" was exceptionally damaging to the crypto industry at the time, but this lawsuit unexpectedly and quickly took a one-sided stance in Uniswap's favor. While the presiding judge, Katherine Polk Failla, ruled that the "fraudulent tokens" claimed by the plaintiffs were indeed securities, she determined that Uniswap was not liable for them. Failla argued that Uniswap's decentralized nature meant the protocol couldn't control which tokens were listed on the platform or who could interact with them. "The case is more like holding the developer of a self-driving car liable for third parties using that car and causing traffic violations or bank robberies." Accordingly, Failla dismissed the federal securities charges in August 2023. The plaintiffs appealed, and the Second Circuit Court of Appeals upheld the federal dismissal in 2025, but remanded the state law portion for retrial. Subsequently, the plaintiffs amended their complaint and filed again. This time, the investors who lost money accused Uniswap and other defendants of aiding and abetting fraud and misrepresentation, profiting from the trading of fraudulent tokens, and violating fraud laws in multiple states. After a retrial by the same judge, Failla, the amended claims were again dismissed, and the case was closed. The judge's reasoning this time was essentially the same as before: Uniswap was unaware of the fraudulent tokens, and even if it was aware, it did not provide any substantial assistance, nor did it meet the definition of fraud under any state law. Regarding unjust enrichment, Uniswap did not gain any direct benefit, and the speculation that such fraudulent projects expanded their user base and brought indirect benefits is too strong. Brian Nistler tweeted, quoting a line from the previous ruling, that it is "illogical" for the drafters of smart contracts to be held responsible for the abuse of the platform by third-party users. A Different Ending for Tornado Cash Facing the same judge, Tornado Cash's Roman Storm had a different outcome. Tornado Cash was first added to the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) sanctions list on August 8, 2022, accused of helping criminals, including North Korean hackers, launder more than $7 billion. Two days after being added to the sanctions list, Dutch police arrested Alexey Pertsev, one of Tornado Cash's core developers. 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 the platform he developed and operated was used for criminal activities but failed to prevent it, thus subjectively condoning Tornado Cash's use as a money laundering tool. Alexey Pertsev is currently appealing, but there have been no further developments. Seven months before Alexey Pertsev's guilty verdict, the U.S. Department of Justice indicted two other developers, Roman Storm and Roman Semenov, in the Southern District of New York. Roman Storm had previously been arrested in Washington state, while Roman Semenov was at large. Roman Storm appeared in court. Although an appeal was subsequently filed and the French government ruled that OFAC's sanctions against Tornado Cash were unauthorized and invalid, Roman Storm still appeared in court last July. After a trial presided over by Judge Katherine Polk Failla, the jury found Roman Storm guilty of "conspiracy to operate an unlicensed money transmitting business," but a formal sentence has not yet been handed down. Under Brian Nistler's tweet celebrating Uniswap's victory, Sigil developer tim-clancy.eth's tweet criticizing the inconsistencies in Failla's verdict (the verdict against Roman Storm was actually a jury decision) received the most likes among all comments. Decentralization is acceptable, but privacy is not. While I'm not a professional lawyer, setting aside political factors and starting from a purely emotional perspective, I can roughly understand why Uniswap and Tornado Cash had different outcomes. The core reason is that the developers of Tornado Cash should have known perfectly well that the coin mixer would inevitably be used for money laundering. This also clearly reveals the regulatory attitude: decentralization is acceptable, but traceability is essential. Tether faced the same predicament, which is why it later cooperated with money laundering investigations and added the ability to freeze accounts. Perhaps Roman Storm, behind bars, will feel injustice upon learning of today's verdict, but he should understand that even in the pro-crypto Trump administration, the US cannot tolerate a platform that helps North Korean state-owned hackers launder money. Crypto's current power is still insufficient to counter the power of a state. Web3 practitioners are speaking out for the developers of Tornado Cash and cheering for Uniswap's victory. In our view, the two protocols are not fundamentally different, and Tornado Cash even has a slight edge in privacy protection. Uniswap's addition of front-end blocking for sanctioned addresses in 2022 had already sparked some debate; now it seems that permissionless access within the existing legal framework may be the only way for decentralized protocols to survive. However, does Uniswap truly bear no responsibility in these fraud cases? Strictly speaking, as the judge analogy suggests, you can't hold Mercedes liable for the bank's losses just because the robbers used a Mercedes to rob it. But from a business perspective, we tend to believe that industry giants should provide protection within their capabilities. Current security tools are capable of identifying a large number of potential scam projects before they even begin. For established projects that have fully capitalized on the Web3 boom, simple screening is not a problem. Protecting investors is not a mandatory obligation, but it is a responsibility that ordinary investors hope Uniswap and similar platforms will proactively take on.