Bancor DAO is facing a class-action lawsuit for failing to uphold its impermanent loss protection promise

According to ChainCatcher, the U.S. District Court for the Western District of Texas, the decentralized community Bancor DAO, which oversees the Bancor DEX, is facing a class-action lawsuit. The lawsuit claims that Bancor DAO deceived investors regarding the impermanent loss protection (ILP) mechanism for liquidity providers and that its investment products are unregistered securities.

According to the lawsuit, Bancor's v2.1 investment product was launched in October 2020 and was the second investment product featuring ILP. The operating deficit was known to the defendants, who attempted to make up for it by launching a new product, v3, which promised "competitive returns… without any risk to users." However, on June 19, 2022, Bancor experienced a surge in withdrawals, leading to a "pause" in ILP. Investors were still able to withdraw assets but incurred losses that ILP was designed to prevent, ultimately resulting in tens of millions of dollars in losses for U.S. retail investors. (Cointelegraph)