Investors Sue The Maker Foundation, MKR Goes up
The Maker Foundation, that supports the MakerDAO (MKR) project, is faced with a proposed class-action lawsuit by investors, which may take more than USD 28 million out of it, but the native token appreciated in the past day.
Despite the lawsuit news for the Foundation, the 29th coin by market capitalization, MKR, has been on the rise in the past 24 hours. Though it dropped 6% at one point on April 14, it quickly corrected upwards. It’s currently (8:13 UTC) trading at USD 295, having appreciated 3% in a day, trimming its weekly losses to less than 9%.
The potential trouble for the Foundation came with a class-action lawsuit filed against it and its affiliates on April 14 in the U.S., with one Peter Johnson as the lead plaintiff. The suit alleges that:
- the Foundation "intentionally and fraudulently" misrepresented the risks of the MakerDAO protocol to investors;
- stated they manage a digital currency platform with overcollateralized currency and major loss-preventive measures - should the value of the collateral drop, a liquidation event would be triggered;
- MakerDAO maintains primary control and ownership of the platform;
- via their misrepresentation they "fostered" or allowed the conditions that let to the Black Thursday;
- during the March 12 market crash, ETH price dropped drastically, which led the MakerDAO to trigger mass liquidation, as well as "pseudo actions," that resulted in 100% collateral loss for some investors in 36 hours.
Johnson is asking damages "in an amount to be proven at trial but not less than [USD] 8.325 million plus punitive damages in an amount not less than [USD] 20 million."
The Foundation said it "has no comment with respect to any planned or pending legal actions."
Meanwhile, on April 13, there was a vote among the holders of the MKR governance token, and a governance poll passed with two-thirds of the votes to compensate those investors who were liquidated in the crash due to the "sub-optimal" protocol performance. The details will be worked out in another poll. However, the Foundation says that, once the money is available and placed in a contract, "to withdraw, vault holders will need to browse to a web page where they agree to indemnify Maker and affiliates against any potential legal claims for their loss."