The dismissal with prejudice of the Second Amended Complaint in Risley v. Universal Navigation is one of the most significant DeFi liability rulings to date, not because its conclusion is surprising, but because of how thoroughly Judge Failla shut the door on every available theory of liability, including the state-law claims that survived the prior rounds.
What the SAC attempted and why it failed
After the Second Circuit affirmed dismissal of the federal securities claims in February 2025, plaintiffs pivoted hard on remand. The SAC dropped the Exchange Act and Securities Act theories entirely and repackaged the case around six state-law claims: aiding and abetting fraud, aiding and abetting negligent misrepresentation, consumer protection violations under New York, North Carolina, and Idaho law, and unjust enrichment. It was a creative pivot, but it ran into the same wall. As Judge Failla noted bluntly, “Despite three chances to get it right, Plaintiffs remain unable to allege plausible claims.” The underlying theory — that Uniswap Labs was liable for providing a marketplace that third-party bad actors misused — was the same theory the court had rejected twice before, just dressed in state-law clothing.
The aiding and abetting analysis is the heart of the ruling
The most instructive portion of the opinion is the aiding and abetting fraud analysis under New York law. To survive dismissal, plaintiffs had to plausibly allege: (1) an underlying fraud; (2) actual knowledge of that fraud by defendants; and (3) substantial assistance by defendants in advancing it. The court found the SAC failed on prongs two and three independently — either deficiency was fatal by itself.
On actual knowledge, plaintiffs offered several theories: post-hoc complaint emails from named plaintiffs, general social media fraud warnings directed at other investors, a March 2022 industry report finding that a substantial majority of tokens launched on the Protocol were scams, and a snippet from an early whitepaper in which Hayden Adams referenced “ponzi schemes” as one possible use of custom liquidity pools. Judge Failla rejected all of them. Post-hoc complaints cannot supply contemporaneous knowledge of an ongoing fraud. Social media warnings directed at other investors, not at defendants, can establish only that defendants should have known — which falls short of actual knowledge. The March 2022 report, issued one month before the end of the Class Period, said nothing about the specific 38 scam tokens at issue. And Adams’s whitepaper comment, while candid about the protocol’s possibilities, was a description of the technology’s flexibility, not an acknowledgment of specific ongoing fraud.
The conscious avoidance argument, essentially that defendants suspected fraud and deliberately avoided confirming it, fared no better. As the court observed, conscious avoidance “is a very high bar” under New York law, requiring that the defendant “suspected a fact and realized its probability, but refrained from confirming it in order later to be able to deny knowledge.” The same factual deficiencies that doomed the actual knowledge argument doomed this one too.
On substantial assistance, the court’s analysis drew directly on the Supreme Court’s 2023 Twitter v. Taamneh decision, which held that simply providing a platform that bad actors exploit does not constitute knowing substantial assistance to their wrongdoing. Judge Failla applied that principle cleanly: providing ordinary, lawful infrastructure that some users abuse is not the same as affirmatively advancing the fraud. She analogized the situation to a bank that does not substantially assist a money launderer merely because the launderer uses the bank’s accounts, and to WhatsApp, which does not substantially assist a drug dealer who uses its messaging service. Critically, the court also found that defendants’ alleged inaction — failing to delist tokens, failing to warn users — could not constitute substantial assistance absent either a specific intent to aid the fraud or an independent legal duty to act. The SAC alleged neither.
The consumer protection and unjust enrichment claims
The state consumer protection claims under NY GBL § 349, the NC UDTPA, and the Idaho CPA collapsed on three independent grounds: no deception by defendants (any warnings about scam risk were public, not uniquely held by defendants); no causation traceable to defendants’ conduct rather than the issuers’ misrepresentations; and, for the North Carolina and Idaho claims, no sufficiently unconscionable or public-policy-offending conduct in simply building an accessible trading platform. The unjust enrichment count failed for the straightforward reason that Uniswap Labs never actually collected the protocol fees during the Class Period — the “fee switch” was never turned on — and the interface fee was not implemented until October 2023, well after the Class Period ended.
Takeaways for DeFi
Several points stand out for attorneys advising DeFi clients or evaluating similar claims:
First, the “neutral infrastructure” defense now has durable support across federal securities law, state common law, and state consumer protection statutes, at both the trial and appellate level. That is a meaningful body of precedent for defense counsel.
Second, the knowledge element deserves close attention. The court’s careful parsing of actual knowledge versus constructive knowledge versus conscious avoidance is a roadmap. General awareness that fraud can occur on a platform is categorically insufficient. Awareness that fraud has occurred after the fact does not establish contemporaneous knowledge. And high-level industry reports about fraud rates in a sector do not establish knowledge of specific frauds against specific plaintiffs. Plaintiffs in future DeFi cases will need to identify concrete, specific, contemporaneous communications tying defendants to awareness of the particular fraud at issue — a very high bar in any permissionless, pseudonymous environment.
Third, the substantial assistance analysis reinforces that inaction alone rarely suffices. Unless plaintiffs can identify an independent legal duty to act — which does not naturally arise from operating open-source infrastructure — failures to delist, warn, or restrict will not move the needle.
Fourth, the unjust enrichment dismissal is a useful reminder to litigants evaluating fee-based theories of recovery: the benefit to defendants must be specific, direct, and actually received. Speculative or attenuated causal chains — “the protocol’s early growth was fueled by scam tokens, which later enabled profitable fee revenue” — are not enough.
Finally, one important caveat: this ruling addresses a protocol that was genuinely decentralized and permissionless during the relevant period. The court’s analysis depends heavily on that fact. DeFi projects that exercise meaningful discretion over token listings, operate admin keys that can pause or modify the protocol, or actively curate the user experience through a centrally controlled interface face a meaningfully different risk profile.
Yesterday’s ruling is a strong shield for genuinely decentralized infrastructure. It is not a blanket immunity for the DeFi ecosystem as a whole.
Tyler Harttraft is a Partner at Bull Blockchain Law LLP focusing on cryptocurrency and digital asset law, including DeFi regulation, exchange compliance, and crypto-related litigation. For questions or guidance on how these developments may affect your business, contact him at tyler@bull-legal.com.
This article is for informational purposes only and does not constitute legal advice. For specific advice regarding your situation, please consult qualified counsel.
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