Sued by the SEC, UNI fell over 20%. Can Uniswap "pay to avoid disaster"?
The UNI dividend plan has been forced to suspend.Author: Grapefruit, ChainCatcher
Editor: Marco, ChainCatcher
On April 11, Fortune Magazine reported that the U.S. Securities and Exchange Commission (SEC) has issued a warning to Uniswap and intends to take enforcement action against the company.
In response, Uniswap founder Hayden Adams stated on social media that Uniswap Labs has received a Wells Notice from the SEC, indicating that the SEC plans to file a lawsuit against it.
Regarding the SEC's lawsuit, he mentioned that Uniswap has processed over $2 trillion in transactions, and many teams and developers have forked or developed based on its code. The product is legal, and they are prepared to fight back and will resist to the end.
A "Wells Notice" is a formal notification from the SEC before it initiates a lawsuit, indicating that the regulatory agency plans to take enforcement action. There is still an opportunity to refute, communicate, and negotiate with the SEC regarding certain allegations before receiving a formal lawsuit.
After the news broke, Uniswap's native token UNI plummeted, dropping from $11.2 to $8.9, with a short-term decline of over 20%. As of the time of publication, the price was $9.3.
UNI Dividend Plan Paused
The impact of the SEC's black swan event continues, with ongoing reports of large on-chain sell-offs of UNI tokens. On-chain data shows that after the SEC's accusation, wallets associated with the Uniswap team or early investors sold 15,000 UNI at an average price of $11.18 (worth $167,000); a smart money address transferred over $10 million worth of UNI tokens to Binance; and a whale marked as "whitzardflow.eth" was liquidated for over 100,000 UNI positions (worth about $1 million).
The dividend plan for UNI tokens may have been paused as a result. The on-chain voting results for the proposal to "Activate Uniswap Protocol Governance," which was supposed to be released on March 8, have been delayed, with users indicating that the SEC affected the progress of the proposal.
On February 23, the Uniswap Foundation announced that it had published the proposal to "Activate Uniswap Protocol Governance" on the governance forum, proposing that its protocol fees be proportionally distributed to UNI token holders who have staked and delegated their voting rights, with voting starting on March 1 on Snapshot. After the news of the Uniswap dividend proposal was released, the price of UNI tokens surged, rising from $7 to nearly $12 overnight.
The governance proposal ended on March 7 with a 100% approval rate, and it was supposed to be released on-chain voting on March 8, but it was not executed as scheduled, and there has been no news or explanation from the official side.
It wasn't until the SEC lawsuit news came out that users realized that the SEC had forced the UNI dividend plan to be paused.
Can Uniswap Settle with a "Fine"?
In response to the SEC's actions, Uniswap Labs stated in an official article titled Fighting for DeFi that Uniswap products are legal, all existing products will continue to operate and be available, and new products will continue to be launched.
However, it is still unclear what the specific content and nature of the SEC's accusations against Uniswap Labs are.
Based on previous lawsuits the SEC has filed against well-known cryptocurrency companies like Binance, Coinbase, and Ripple, Uniswap Labs could be accused of "illegally offering unregistered securities to the public or failing to register as a broker or exchange."
However, the notice issued by the SEC this time is not a formal lawsuit or regulatory enforcement document, leaving room for communication with Uniswap.
In August of last year, the Southern District Court of New York (SDNY) dismissed a class-action lawsuit against Uniswap. The case involved a group of investor plaintiffs accusing Uniswap and its founders of allowing fraudulent tokens to be issued and traded on the protocol, claiming that they did not register under U.S. federal securities laws, violating regulations by listing fraudulent tokens, causing harm to investors, and seeking compensation.
Regarding this case, the judge stated that the current cryptocurrency regulatory framework does not provide a basis for the plaintiffs' claims, and Uniswap is not responsible for any damages caused by third parties using the protocol; the token issuers who engaged in harmful actions should bear the responsibility.
Although the SEC's warning came very suddenly, some users believe that Uniswap is unlikely to be at a disadvantage in this future confrontation.
Some community users believe that Uniswap is likely to settle this SEC lawsuit with a fine.
As the regulatory situation has not yet formally materialized, and the details of the accusations against Uniswap remain unclear, the future remains full of uncertainty, casting a shadow over the previously stagnant DeFi industry.
As a leading product in the DeFi sector, every move by the SEC regarding Uniswap will affect the future development of other DeFi protocols.
