SEC has served Uniswap Labs with a notice of intent to sue

What’s new? The developers of Uniswap, a decentralized crypto exchange (DEX) on the Ethereum network, have received a notice from the US Securities and Exchange Commission (SEC) that they are ready to take enforcement action. The commission sends the so-called Wells notice at the end of an internal investigation into possible violations, signaling an intention to take legal action. Uniswap founder Hayden Adams said he was “not surprised. Just annoyed, disappointed, and ready to fight.”

Source: Twitter.com

What else is known? Back last year, following the filing of lawsuits against Binance and Coinbase, the commission said it was preparing more investigations into crypto exchanges and decentralized financial protocols for securities law violations. There is no word yet on specific allegations against developer Uniswap Labs. Presumably, as in other cases, it is an unregistered offering of securities.

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Unlike conventional brokerage firms or crypto exchanges, DeFi platforms do not have a central authority to act as a counterparty to transactions between buyers and sellers. They rely on automated protocols governed solely by code that sets trading rules, collateral requirements, and other parameters.

In the case of Uniswap Labs, the team wrote the original base code that makes the protocol work and provides users with an interface to trade cryptocurrencies. The protocol is open source and is used by many other projects in the DeFi industry.

This distinction was crucial in a class action lawsuit against Uniswap Labs filed last year, alleging that the company was responsible for defrauded traders. The victims invested in scam tokens that third parties deployed on Uniswap. The court then sided with the exchange and dismissed the lawsuit.

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The exchange was launched in November 2018. On April 5 of this year, the cumulative trading volume for the entire time of operation exceeded $2 trillion. The Ethereum-based Uniswap version three protocol is the largest DEX among projects on all blockchains.

Commenting on the new Wells notice, Hayden Adams said that Uniswap Labs “built entirely new financial infrastructure that is transparent, fair, secure, and accessible powering an entire industry.”

He said the exchange’s team continues to work out of its New York office and has no intention of leaving the United States because “when you build technology that improves people’s lives – you don’t need to hide.”

He also criticized the SEC for its approach to regulating the industry:

“But it’s been clear for a while that rather than working to create clear, informed rules, the SEC has decided to focus on attacking long-time good actors like Uniswap and Coinbase. All while letting bad actors like FTX slip by.”

Notably, last year, Congress allowed the possibility of SEC Chair Gary Gensler’s corrupt ties to FTX and launched an investigation into the matter. In March of this year, FTX founder Sam Bankman-Fried received 25 years in prison for an $8 billion fraud, the bankruptcy process of the exchange continues, and clients and creditors have not yet been reimbursed.

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Hayden Adams also said that Uniswap is doing a much better job of fulfilling the SEC’s mission to protect investors, maintain fair, orderly, and efficient markets, and promote capital formation. He is disappointed that “we’ll have to fight a US government agency to protect our company and our industry,” adding that the fight could take years and require going all the way to the Supreme Court.

“The future of financial technology and our industry hangs in the balance. If we stand together we can win. I think freedom is worth fighting for,” Adams concluded, emphasizing that Uniswap has no intention of curtailing the services it offers.