Lawsuit Filed Against Maker Following Black Thursday Losses

Lawsuit Filed Against Maker Following Black Thursday Losses

On behalf of investors who lost funds following a protocol failure on March 12, or Black Thursday, a class-action lawsuit has been filed against the Maker Foundation.

The suit, which could represent up to 3,000 investors, was filed by lead plaintiff Peter Johnson, represented by Harris Berne Christensen LLP of Portland, Ore, at the Northern District Court in California.

The suit alleges that “intentionally misrepresented the risks associated with CDP ownership,” including the Maker Ecosystem Growth Foundation, the Dai Foundation, and the Maker Foundation, resulting in a loss of $8,325 million in investor money on Black Thursday.

Johnson filed three counts including negligence, deliberate misrepresentation and negligent misrepresentation.

The Maker Foundation said last Thursday that it was aware of the lawsuit and that “would address all questions as directly as possible.”

Maker Says no Comment Regarding Legal Actions

In a statement Tuesday, the firm said, “The Maker Foundation has no comment with respect to any planned or pending legal actions.”

A sharp drop in the price of ether – the primary digital asset used as collateral in the MakerDAO protocol to secure dollar-sized dai stablecoin loans – created underlying congestion on the Ethereum blockchain while liquidating thousands of collateralized debt positions (CDPs) held by investors as well.

Johnson claims auctioned collateral had been advertised for returning to users after a haircut of 13 percent. Instead, many positions had been completely or almost completely liquidated.

That 13 percent, according to the white paper of the project, is not a hard line but depends on internal conditions in the ecosystem. Johnson claims that various Maker products, including the commonly used decentralized application (dapp) oasis, claim that the highest liquidation strike is a 13 percent penalty.

The suit also specifically cites Maker’s recent efforts to attract CDP holders with crypto-currency exchange Coinbase.

“The Maker Foundation and other third-party user interfaces informed users that, because their CDPs would be significantly overcollateralized, liquidation events would only result in a 13 percent liquidation penalty applied against the remaining collateral, after which the remaining collateral would be returned to the user,” the suit alleges.

Johnson claims the actions of the Maker Foundation were “intentional and fraudulent,” resulting in a personal loss of $200,000 in ETH after investing in a product that misrepresented the risks of opening a CDP position.

0 0 vote
Article Rating
Share this page
Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments
Abdulhay Mahmoud 414 Articles
Abdulhay Mahmoud is a creative writer with over 15 years of experience in journalism, translation, and investor relations. He has B.A in English and Literature from a reputable University. He recently became a contributor at Cryptolydian.com to fulfill his thirst in reporting digital coins and blockchain-related news, an interest was built over the years.