Uniswap Wins Legal Battle, Tornado Cash Developer Faces Charges

Original author: Eric, Foresight News

At 3:00 AM Beijing time on March 3, a class-action lawsuit demanding that Uniswap and its founder, Hayden Adams, be held accountable for scam tokens on Uniswap was dismissed by the U.S. District Court for the Southern District of New York. Uniswap Foundation’s General Counsel, Brian Nistler, called it a “landmark ruling for DeFi.”

Hayden Adams also tweeted, "If you wrote open-source smart contract code that was used by scammers, the responsibility lies with the scammers, not the open-source developers. This is a fair and just outcome."

This is undoubtedly good news for Web3 developers. However, few know that the judge who issued this “just ruling” is the same person who, during their tenure as former SEC chair, ruled that the developers of the mixer Tornado Cash were guilty.

Nearly four years have passed since the class action lawsuit against Uniswap was filed, and it has now been resolved.

In April 2022, Uniswap users represented by Nessa Risley filed a class-action lawsuit against defendants Paradigm, a16z, Uniswap, and its founder Hayden Adams, alleging violations of federal securities laws through the issuance and sale of unregistered securities, including UNI, as tokens on Uniswap. The lawsuit further alleges that the defendants failed to register Uniswap as an exchange or broker-dealer under applicable securities laws and failed to provide investors with registration statements for the securities they issued and sold.

This lawsuit was initiated by the law firms Kim & Serritella and Barton, on behalf of 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" carried extraordinary weight in the crypto industry at the time, but the lawsuit unexpectedly and swiftly turned decisively in Uniswap's favor.

The presiding judge, Katherine Polk Failla, acknowledged that the plaintiff’s alleged “fraudulent tokens” were indeed securities, but concluded that Uniswap should not be held liable for them. Failla reasoned that Uniswap’s decentralized nature means the protocol cannot control which tokens are listed on the platform or who interacts with it, stating that “the case is akin to holding the developer of an autonomous vehicle responsible for third parties using the vehicle to commit traffic violations or rob banks.”

Accordingly, Failla dismissed the federal securities law claims in August 2023; the plaintiffs subsequently appealed, and in 2025, the Second Circuit affirmed the dismissal of the federal claims but remanded the state law claims for further review.

Subsequently, the plaintiffs amended their complaint and filed suit again. This time, the losing investors alleged that Uniswap and other defendants aided and abetted fraud and misrepresentation, profited from the trading of fraudulent tokens, and violated multiple states' fraud statutes.

After a further review by Judge Failla, the amended complaint was dismissed again, with no leave to amend, and the case was permanently concluded.

The judge’s reasoning this time was essentially the same as last time: Uniswap was unaware of the scam tokens, and even if it had been aware, it did not provide substantial assistance. Furthermore, it does not meet the definition of fraud under any state law. Regarding unjust enrichment, Uniswap did not obtain direct benefits; any indirect benefit from increased user base due to such scam projects is too speculative.

Brian Nistler stated in a tweet that, quoting from the previous ruling, it is "illogical" for the drafters of smart contracts to be held responsible for third-party users' misuse of the platform.

Facing the same judge, Roman Storm of Tornado Cash met a different outcome.

Tornado Cash was added to the sanctions list by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) on August 8, 2022, accused of facilitating money laundering of over $7 billion for criminals, including North Korean hackers. Two days after being sanctioned, Dutch police arrested Alexey Pertsev, one of Tornado Cash’s core developers.

On May 14, 2024, a Dutch court found Alexey Pertsev guilty of money laundering and sentenced him to 64 months in prison. The court determined that Pertsev was aware that the platform he developed and operated was being used for criminal activities and failed to prevent it, thereby knowingly enabling Tornado Cash to function as a money laundering tool. Alexey Pertsev is currently appealing the verdict, but no further updates have been released.

Seven months before Alexey Pertsev was convicted, the U.S. Department of Justice charged two other developers, Roman Storm and Roman Semenov, in the U.S. District Court for the Southern District of New York. Roman Storm had previously been arrested in Washington State, while Roman Semenov remained at large.

Roman Storm appears in court

Thereafter, despite appeals, French authorities ruled that OFAC’s sanctions against Tornado Cash were ultra vires and invalid. Nevertheless, Roman Storm stood trial in July last year. After a trial presided over by Judge Katherine Polk Failla, the jury found Roman Storm guilty of “conspiring to operate an unlicensed money transmitting business,” but no formal sentencing has yet been imposed.

Under Brian Nistler’s tweet celebrating Uniswap’s court victory, a tweet by Sigil developer tim-clancy.eth mocking the Failla ruling for its contradictions (noting that the ruling against Roman Storm was actually made by a jury) received the highest number of likes among all comments.

I am not a professional lawyer, but setting aside political factors and relying on basic intuition, I can roughly understand why Uniswap and Tornado Cash had different outcomes.

The core reason is that the developers of Tornado Cash must have been fully aware that mixers would inevitably be used for money laundering. This clearly reveals regulators' stance: decentralization is acceptable, but transactions must be traceable. Tether once faced the same dilemma, and subsequently began cooperating with money laundering investigations and added the ability to freeze assets.

Perhaps Roman Storm, behind bars, would also feel the verdict today is unjust, but he should understand that even in the United States under the pro-crypto Trump administration, platforms that assist North Korean state hackers in money laundering cannot be tolerated. Today’s power of crypto is still insufficient to stand against the power of the state.

Web3 practitioners have voiced support for the developers of Tornado Cash and celebrated Uniswap’s legal victory, as in our view, the two protocols are not fundamentally different—in fact, Tornado Cash offers even stronger privacy protections. Uniswap’s 2022 decision to block sanctioned addresses on its frontend sparked debate at the time, but it now appears that permissionless operation may be the only viable path forward for decentralized protocols under existing legal frameworks.

Then again, is Uniswap truly without any responsibility in these scam incidents?

Logically speaking, as a judge might put it, you can’t hold Mercedes-Benz responsible for a bank’s losses just because a robber used a Mercedes to commit the crime. However, in business terms, we believe giants should provide protection within their capabilities. Today’s security tools are already capable of identifying a large number of potential scam projects in advance; for established projects that have reaped the benefits of Web3’s growth, such basic screening is not burdensome.

It is not an obligatory duty to help protect investors, but it is a responsibility that retail investors hope platforms like Uniswap will voluntarily take on.