“Bancor DAO Faces Class-Action Lawsuit Alleging Failure to Deliver on Impermanent Loss Protection”

Investors in the United States have filed a class-action lawsuit against Bancor decentralized autonomous organization (DAO), its operator, BProtocol Foundation, and its founders. The lawsuit alleges that Bancor misled investors about its impermanent loss protection (ILP) mechanism for liquidity providers and was an unregistered security. The investment product, which was launched in October 2020 and the second to feature ILP, was operating at a deficit, which the defendants were aware of and tried to cover by launching a new product, v3. Impermanent loss occurs within the decentralized finance model when a liquidity provider deposits assets into a pool, and one of the tokens involved loses value against another in the pool. This led to “losses approaching 50% of their LP [Liquidity Provider] Program investment,” amounting to tens of millions of dollars to U.S. retail investors, according to the suit. The plaintiffs allege that the founders of the DAO retained control of it and that Bancor’s LP Program “is a binding investment contract and a security under U.S. law.” The plaintiffs make six charges against the defendants, and they are demanding restitution, damages, and interest.

J-S Tremblay
About the author - J-S Tremblay

I've been involved in the cryptocurrency world since 2016 and trading since 2019. I started Moon and Lambo in 2021. I'm passionate about crypto and love to share my knowledge. I hate bankers and I hope that cryptocurrency will change the financial world for the better. View full profile...

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