On March 2, 2026, the U.S. District Court for the Southern District of New York struck down another attempt by users of the decentralized crypto exchange, Uniswap Labs, to pin fraud by token issuers on the platform enabling the tokens’ trading. The decision in Risley v. Uniswap, No. 22-cv-02780, 2026 WL 572065, came on remand after the U.S. Court of Appeals for the Second Circuit affirmed dismissal of Plaintiffs’ federal securities law claims, holding that “it defies logic that a drafter of a smart contract, a computer code, could be held liable under the Exchange Act for a third-party user's misuse of the platform.” Risley v. Universal Navigation Inc., No. 23-1340-CV, 2025 WL 615185, at *4 (2d Cir. Feb. 26, 2025) (internal quotation omitted). However, the Second Circuit directed the lower court to consider Plaintiffs’ state-law claims.
On remand, Plaintiffs amended their complaint to remove securities law claims while retaining claims for aiding and abetting fraud and negligent misrepresentation, and adding claims for unfair and deceptive practices against consumers. At their core, however, the district court concluded that each of these claims suffered from the same fundamental defect that doomed Plaintiffs’ federal claims: merely creating an environment where fraud could occur is not the same as knowingly facilitating the wrongdoing of others. This decision and its predecessors dismissing Plaintiffs’ federal claims provide insight into the circumstances under which providers of crypto exchange services can be held liable for the actions of wrongdoers on their platforms.
Uniswap’s exchange does not operate like a traditional equity exchange that matches buyers and sellers. Rather, it uses “liquidity pools” into which token issuers contribute a pair of tokens: the issuer’s new token and a preexisting token that has inherent value, which creates trading liquidity. Plaintiffs allege that they used Uniswap’s decentralized cryptocurrency exchange protocol to acquire digital tokens in scams that caused them losses. These scams took two forms: “rug pulls” and “pump and dumps.” In rug pulls, a token issuer removes liquidity from the new token’s liquidity pool, rendering the new tokens worthless. In pump and dumps, an issuer acquires a large volume of its own tokens, pumps the price up through promotion, and then dumps the tokens at the inflated price, causing the token’s value to crash.
To prove that Uniswap aided and abetted the issuers’ fraud, Plaintiffs were required to show (1) the existence of a fraud, (2) Uniswap’s knowledge of the fraud, and (3) that Uniswap provided substantial assistance to advance the fraud’s commission.
The court held that allegations about fraud on the exchange do not support a strong inference that Uniswap had actual knowledge of the specific frauds Plaintiffs encountered on it. Plaintiffs’ ex post notifications to Uniswap and social media postings that fraud had occurred were insufficient to establish that Uniswap had knowledge of these particular frauds at a point in time that would have allowed it to advance or conceal them. Plaintiffs’ argument that Uniswap “consciously avoided” knowledge also failed because they did not allege that Uniswap suspected a fact, realized its probability, and refrained from confirming it in order to be able to deny knowledge.
The court further held that creating a marketplace on which many users could interact legitimately did not constitute “substantial assistance” in facilitating the scams, even if some users acted fraudulently. The court drew analogies, noting that this argument failed for the same reason that a bank could not be held liable for a money launderer using the bank to wash its cash and WhatsApp does not substantially assist a drug dealer coordinating a sale on its platform. According to the court, Plaintiffs had to show affirmative assistance, concealment, or a failure to act when required to do so that enabled the fraud to proceed. Inaction can only constitute substantial assistance when it was designed intentionally to aid the primary fraud or was in conscious and reckless violation of a duty to act. The court held that neither was established by allowing the tokens to be swapped on the exchange without a specific intent to aid the issuers’ fraud.
Similarly, the court held that Uniswap did not have actual knowledge of, or substantially assist, the issuers’ negligent misrepresentations and therefore could not be held liable on that count. Plaintiffs’ consumer protection claims failed as well because Plaintiffs’ allegations “repeatedly tie[d] Plaintiffs’ injuries to the issuers’ fraudulent misrepresentations and omissions, and not Defendants’ acts.”
This decision holds that to be held liable for aiding and abetting the misconduct of others, a platform must do more than simply create the environment in which the wrongdoing occurs. Liability may attach where the platform has knowledge of the fraud and affirmatively acts to further or conceal it. In this regard, what platform operators knew about specific misconduct, when they knew it, and what they did in response are critical considerations.