Maker (MKR)
$555.03 (1.60 %) View coin
14 April 2020

MakerDAO receives class-action lawsuit from victims of Black Thursday's losses

After millions of dollars worth of ETH collateral was auctioned off for free during Black Thursday's failures, one user is suing the foundation for $28.3 million accusing them of negligent and intentional misrepresentation of the risks of using the protocol. Users were led to believe the maximum loss of depositing collateral would be the liquidation penalty, however, this wasn't the case when the Ethereum network became too congested for liquidators to successfully purchase the collateral. The plaintiff expects 1,000 members to join the suit seeking $8.3 million from the losses plus punitive damages up to $20 million.

Why it matters - Despite the intention to dissolve the Maker Foundation, there remains substantial centralization risk around the existing organization that has raised capital and employed key contributors to the protocol. If this lawsuit were to find the Foundation liable for these losses it could significantly hamper their ability to execute on their roadmap before their planned dissolution. - A Governance Poll was recently held to assess whether or not the Foundation should compensate vault holders who faced losses on Black Thursday. With 65% of voters choosing Yes, further effort will be made to decide an exact compensation plan. If that plan is accepted, the lawsuit may have a harder time fighting their case as users will have been paid out already.

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