decrypt.co
Prominent cryptocurrency lawyer Preston Byrne has called out irregularities with Decentralized Finance (DeFi) project SushiSwap. Over the weekend, he advised those who've lost money to lawyer up, assuring them that recourse in law was available—“there are ways,” he emphasized.
This coin is regulated as a security, appears not to comply with Section 5 or an exemption from registration and therefore a sale is subject to a right of rescission. With an alleged “exit scam” you could also probably find common law claims. There are ways. https://t.co/geQH44PNcc
— Preston Byrne (@prestonjbyrne) September 6, 2020
SushiSwap is like a yield farming version of decentralized exchange Uniswap. The protocol took the crypto world at the end of last month when it became the highest-flying unicorn in DeFi.
But last weekend—while its token $SUSHI fell from an all-time high of $11 to $2.38—SushiSwap’s pseudonymous creator Chief Nomi cashed out, withdrawing $12 million from $SUSHI's liquidity pool. The community accused him of pulling an exit scam, which he denied.
Currently, control of the protocol, and the $1.3 billion locked up in its smart contracts, rests with the CEO of the FTX exchange and Alameda Research, Sam Bankman-Fried, after Chief Nomi transferred control to him. Previously an arch-critic of the project, Bankman-Fried is now working with the community to give them power over SushiSwap’s future direction.
Welcome to Sam’s Sushi bar! https://t.co/LgWzFeZIDj pic.twitter.com/MLfSEbSQNX
— zaq子 (@klortu868o) September 8, 2020
Many still maintain that Chef Nomi should return the $12 million he withdrew. And Byrne is adamant that those who lost funds should file a report with the FBI and lawyer up.
“In the case of SushiSwap, there are clearly steep losses across the market, and likely one source available for recovery, chiefly, "Chef Nomi,” he told Decrypt. “There is only one legitimate way to access those funds, and that is by winning a lawsuit.”
He added that the law doesn’t discriminate against so-called magic Internet tokens, and meme-coins.
“US investor protection laws don't protect only unsophisticated investors or investors who don't invest in meme tokens. They protect all investors and particularly investors with clean hands,” he said.
He also warned that, like ICOs in 2017, DeFi is likely to already be in the regulators' crosshairs, and those who believe otherwise “are making what will prove to be a very costly mistake.”
So listen up: any more Chief Nomi antics, and the wacky world of DeFi—with its unaudited vegetable coins and its fishy business—may soon be no more.