A new class-action lawsuit against DeFi giant the Maker Foundation alleges that the company misrepresented the risks investors in the ecosystem faced, leading to catastrophic losses of collateral on MakerDAO on March 12.
The allegations and who stands to gain
The complaint, which was filed in the Northern District Court of California on April 14, accuses three entities affiliated with Maker of negligence and intentional misrepresentation before investors, or “collateralized debt position holders.”
According to the complaint, collateralized debt position holders lost $8.325 million when the value of the Ethereum (ETH) that Maker held in collateral plummeted relative to the dollar-pegged stablecoin DAI in which those loans were held.
The risk of such a scenario was not clear to these investors, the complaint alleges, further criticizing Maker’s advertised decentralization:
“While misrepresenting to CDP Holders the actual risks they faced, The Maker
Foundation neglected its responsibilities to its investors by either fostering or, at the very least, allowing the conditions that led to Black Thursday, all after actively soliciting millions of dollars of investment into its ecosystem.”
The complaint asks for a minimum of $8.325 million in compensation and $20 million in punitive damages.
Black Thursday for Maker and new class action suits
As Cointelegraph reported, the collapse of ETH’s price led to some lots of the token being sold for free in major debt auctions, as well as discussions about whether to shut off Maker’s liquidation bots.
Speaking to Cointelegraph, the lead attorney for the plaintiff, Adam Heder of Harris Berne Christensen, declined to comment on the fate of Maker should the judge side with the class.
Heder also denied any relationship to a rash of class actions filed in New York at the beginning of April against a who’s-who of major crypto firms.
Joseph Spezzano received a Masters Degree in computer science from The University of Massachusetts. Joseph has been working as a full-time blockchain programmer for the past 5 years. In his spare time, Joseph enjoys writing for CryptocurrencyInvestments.com and traveling.