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.

Source: Adobe/gunnar3000

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."