Case 23-1340, Document 66, 04/12/2024, 3619661, Page1 of 50
`
`23-1340
`
`United States Court of Appeals
`for the
`Second Circuit
`
`
`
`NESSA RISLEY, individually and on behalf of all others similarly situated,
`JAMES FREELAND, ROBERT SCOTT, ANNIE VENESKY,
`ANDREW CARDIS, DEAN MEYERS,
`
`Lead Plaintiffs-Appellants,
`
`– v. –
`
`UNIVERSAL NAVIGATION INC., DBA Uniswap Labs, HAYDEN Z.
`ADAMS, PARADIGM OPERATIONS LP, AH CAPITAL MANAGEMENT,
`L.L.C., DBA Andreessen Horowitz, UNION SQUARE VENTURES, LLC,
`UNISWAP FOUNDATION,
`
`Defendants-Appellees.
`––––––––––––––––––––––––––––––
`ON APPEAL FROM THE UNITED STATES DISTRICT COURT
`FOR THE SOUTHERN DISTRICT OF NEW YORK
`
`BRIEF FOR DEFENDANTS-APPELLEES
`UNIVERSAL NAVIGATION INC. AND HAYDEN Z. ADAMS
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`MAEVE L. O’CONNOR
`ELLIOT GREENFIELD
`BRANDON FETZER
`DEBEVOISE & PLIMPTON LLP
`66 Hudson Boulevard
`New York, New York 10001
`(212) 909-6000
`Attorneys for Defendants-Appellees
`Universal Navigation Inc. and
`Hayden Z. Adams
`
`

`

`Case 23-1340, Document 66, 04/12/2024, 3619661, Page2 of 50
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`CORPORATE DISCLOSURE STATEMENT
`
`Defendant-Appellee Universal Navigation Inc. d/b/a Uniswap
`
`Labs is a Delaware corporation. Uniswap Labs certifies that it has no
`
`parent corporation and that no publicly held corporation owns 10% or
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`more of its stock.
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`
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`

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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page3 of 50
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`TABLE OF CONTENTS
`
`STATEMENT OF THE ISSUES ............................................................... 1
`
`STATEMENT OF THE CASE .................................................................. 2
`
`I. Nature of the Case ........................................................................... 2
`
`II. Statement of Facts ........................................................................... 5
`
`A. The Parties .............................................................................. 5
`
`B. The Protocol ............................................................................. 6
`
`C. Liquidity Pools ........................................................................ 7
`
`D. Trading Fees .......................................................................... 10
`
`E. The Interface ......................................................................... 12
`
`F.
`
`Plaintiffs’ Conflation of Labs, the Protocol, and the
`Interface ................................................................................ 13
`
`III. Plaintiffs’ Claims ............................................................................ 15
`
`IV. The District Court’s Dismissal ....................................................... 16
`
`SUMMARY OF ARGUMENT ................................................................. 17
`
`STANDARD OF REVIEW ...................................................................... 18
`
`ARGUMENT ........................................................................................... 20
`
`I.
`
`Plaintiffs Fail to State a Claim Against Labs Under Section
`29(b) of the Exchange Act. ............................................................. 20
`
`A. Plaintiffs Fail to Plead Contractual Privity With Labs. ...... 21
`
`B. Plaintiffs Fail to Identify a Contract That Violates the
`Exchange Act. ........................................................................ 27
`
`II. Plaintiffs Fail to State a Claim Against Labs Under Section
`12(a)(1) of the Securities Act. ......................................................... 30
`
`ii
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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page4 of 50
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`A. Plaintiffs Fail to Plead That Labs Passed Title of the
`Tokens. .................................................................................. 31
`
`B. Plaintiffs Fail to Plead That Labs Solicited the
`Purchase of the Tokens. ........................................................ 35
`
`III. Plaintiffs Fail to State a Federal Securities Claim Against
`Mr. Adams. ..................................................................................... 39
`
`IV. Remand to the District Court Is Appropriate With Respect to
`Plaintiffs’ State Law Claims. ......................................................... 40
`
`CONCLUSION ........................................................................................ 41
`
`
`
`
`
`iii
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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page5 of 50
`
`TABLE OF AUTHORITIES
`
`Page(s)
`
`Cases:
`Allen v. Credit Suisse Sec. (USA) LLC,
`895 F.3d 214 (2d Cir. 2018) .................................................................. 35
`Amidax Trading Grp. v. S.W.I.F.T. SCRL,
`671 F.3d 140 (2d Cir. 2011) .................................................................. 11
`Ark. Tchr. Ret. Sys. v. Goldman Sachs Grp., Inc.,
`11 F.4th 138 (2d Cir. 2021) ................................................................... 40
`Ashcroft v. Iqbal,
`556 U.S. 662 (2009) ............................................................................... 19
`ATSI Commc’ns, Inc. v. Shaar Fund, Ltd.,
`493 F.3d 87 (2d Cir. 2007) ................................................................ 5, 19
`Bell Atl. Corp. v. Twombly,
`550 U.S. 544 (2007) ............................................................................... 19
`Capri v. Murphy,
`856 F.2d 473 (2d Cir. 1988) .................................................................. 35
`Com. Union Assur. Co., plc v. Milken,
`17 F.3d 608 (2d Cir. 1994) .................................................................... 31
`Cosgrove v. Oregon Chai, Inc.,
`520 F. Supp. 3d 562 (S.D.N.Y. 2021) ...................................................... 5
`Credit Suisse v. ARM Fin. Grp.,
`2001 WL 300733 (S.D.N.Y. March 28, 2001) ....................................... 35
`EMA Fin., LLC v. Vystar Corp.,
`2021 WL 1177801 (S.D.N.Y. Mar. 29, 2021) ............................ 21, 26, 28
`Frati v. Saltzstein,
`2011 WL 1002417 (S.D.N.Y. Mar. 14, 2011) ........................................ 20
`Gamma Traders - I LLC v. Merrill Lynch Commodities, Inc.,
`41 F.4th 71 (2d Cir. 2022) ..................................................................... 22
`
`iv
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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page6 of 50
`
`Griffin v. PaineWebber, Inc.,
`2001 WL 740764 (S.D.N.Y. June 29, 2001) .......................................... 37
`Holsworth v. BProtocol Fund,
`2021 WL 706549 (S.D.N.Y. Feb. 22, 2021) ........................................... 37
`In re Bibox Grp. Holdings Ltd. Sec. Litig.,
`534 F. Supp. 3d 326 (S.D.N.Y. 2021) .................................................... 25
`In re Morgan Stanley Info. Fund Sec. Litig.,
`592 F. 3d 347 (2d Cir. 2010) ................................................................. 30
`James v. Gage,
`2019 WL 1429520 (S.D.N.Y. Mar. 29, 2019) ........................................ 11
`NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co.,
`693 F.3d 145 (2d Cir. 2012) .................................................................. 19
`NexPoint Diversified Real Estate Tr. v. Acis Cap. Mgmt., L.P.,
`80 F.4th 413 (2d Cir. 2023) ............................................................. 27, 28
`Oberlander v. Coinbase Global Inc.,
`2024 WL 1478773 (2d Cir. Apr. 5, 2024) .................................. 26, 34, 40
`Perry v. NYSARC, Inc.,
`424 F. App’x 23 (2d Cir. 2011) .............................................................. 11
`Pinter v. Dahl,
`486 U.S. 622 (1988) ....................................................................... passim
`Pompano-Windy City Partners, Ltd. v. Bear Stearns & Co.,
`794 F. Supp. 1265 (S.D.N.Y. 1992) ....................................................... 28
`Rombach v. Chang,
`355 F.3d 164 (2d Cir. 2004) .................................................................. 40
`Rothman v. Gregor,
`220 F.3d 81 (2d Cir. 2000) .................................................................... 19
`Rothstein v. UBS AG,
`708 F.3d 82 (2d Cir. 2013) .................................................................... 19
`Scottrade, Inc. v. BroCo Invs., Inc.,
`774 F. Supp. 2d 573 (S.D.N.Y. 2011) .................................................... 21
`
`v
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`Steed Fin. LDC v. Nomura Sec. Int’l, Inc.,
`2001 WL 1111508 (S.D.N.Y. Sept. 20, 2001) ....................................... 37
`Stratte-McClure v. Morgan Stanley,
`776 F.3d 94 (2d Cir. 2015) ............................................................... 18-19
`Tongue v. Sanofi,
`816 F.3d 199 (2d Cir. 2016) .................................................................... 5
`Underwood v.Coinbase Global, Inc.,
`654 F. Supp. 3d 224 (S.D.N.Y. 2023) .............................................. 33, 34
`Van Loon v. Dep’t of Treasury,
`2023 WL 5313091 (W.D. Tex. Aug. 17, 2023) ................................ 24, 35
`Williams v. Block.one,
`2022 WL 5294189 (S.D.N.Y. Aug. 15, 2022) ........................................ 25
`Wilson v. Saintine Expl. & Drilling Corp.,
`872 F.2d 1124 (2d Cir. 1989) ................................................................ 39
`
`Statutes & Other Authorities:
`15 U.S.C. § 77b.......................................................................................... 20
`15 U.S.C. § 77l(a)(1) .................................................................................... 1
`15 U.S.C. § 77o ............................................................................................ 1
`15 U.S.C. § 78c .......................................................................................... 20
`15 U.S.C. § 78cc(b) ................................................................................ 1, 20
`15 U.S.C. § 78t(a) ........................................................................................ 1
`28 U.S.C. § 1332(d)(2) ............................................................................... 40
`
`
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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page8 of 50
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`
`
`STATEMENT OF THE ISSUES
`
`Plaintiffs assert claims against Defendants Universal Navigation
`
`Inc. d/b/a Uniswap Labs (“Labs”), Hayden Z. Adams, and the Uniswap
`
`Foundation, as well as venture capital firms Paradigm Operations LP,
`
`AH Capital Management, L.L.C. d/b/a Andreessen Horowitz, and Union
`
`Square Ventures, LLC (collectively, the “VC Defendants”). Plaintiffs
`
`assert claims against all Defendants under Section 29(b) of the
`
`Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C.
`
`§ 78cc(b), and Section 12(a)(1) of the Securities Act of 1933 (the
`
`“Securities Act”), 15 U.S.C. § 77l(a)(1), as well as state law claims for
`
`aiding and abetting fraud, aiding and abetting negligent
`
`misrepresentation, and unjust enrichment and claims under Idaho and
`
`North Carolina state securities laws. Plaintiffs assert control person
`
`claims against Mr. Adams and the VC Defendants under Section 20(a)
`
`of the Exchange Act, 15 U.S.C. § 78t(a), and Section 15 of the Securities
`
`Act, 15 U.S.C. § 77o, as well as under Idaho and North Carolina state
`
`securities laws.
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`

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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page9 of 50
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`This case presents the following issues for review:
`
`1. Whether the District Court properly dismissed Plaintiffs’
`
`claims under Sections 29(b) and 20(a) of the Exchange Act where
`
`Plaintiffs failed to plead any contract between any Plaintiff and any
`
`Defendant, much less one that requires a violation of the Exchange Act.
`
`2. Whether the District Court properly dismissed Plaintiffs’
`
`claims under Sections 12(a)(1) and 15 of the Securities Act where
`
`Plaintiffs failed to plead that any Defendant sold or solicited the
`
`purchase of the cryptocurrency tokens at issue.
`
`STATEMENT OF THE CASE
`
`I. Nature of the Case
`
`Plaintiffs’ claims relate to purported “scams” perpetrated by the
`
`issuers of certain cryptocurrency tokens (the “Tokens”), yet Plaintiffs do
`
`not name any of those supposed scammers in this lawsuit. Instead,
`
`they assert claims against Labs – a software company that developed
`
`the code underlying the decentralized cryptocurrency trading protocol
`
`that Plaintiffs used to acquire the Tokens – along with Mr. Adams, its
`
`founder and CEO, the VC Defendants and the Uniswap Foundation.
`
`Those claims necessarily fail because there are no well-pleaded factual
`
`allegations that Labs, Mr. Adams, or any other Defendant ever held
`
`2
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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page10 of 50
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`title or any other interest in the Tokens, much less sold the Tokens to
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`Plaintiffs.
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`The Uniswap Protocol (the “Protocol”), which Plaintiffs allege they
`
`used to acquire the Tokens, is simply computer code running on the
`
`Ethereum blockchain – a system of “smart contracts,” which Plaintiffs
`
`themselves describe as “self-executing, self-enforcing” code. Users trade
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`tokens by means of “liquidity pools”: for a specific pair of tokens traded
`
`on the Protocol, some users supply the tokens to a liquidity pool (the
`
`“liquidity providers”), and other users can then interact with the
`
`liquidity pool to trade one token for the other. At no point does Labs,
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`the software company, have any interest in the tokens traded on the
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`Protocol – no title, ownership, custody or control. A trading fee is paid
`
`by the purchaser to the liquidity pool, which automatically distributes
`
`the fee pro rata to the liquidity providers. The process is fully
`
`automated and, once launched, runs entirely independently of Labs.
`
`Indeed, just as the Bitcoin Protocol continues to operate many years
`
`after creator Satoshi Nakamoto disappeared, the Protocol would remain
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`operational if Labs were to cease to exist.
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`3
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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page11 of 50
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`Accordingly, Plaintiffs’ central assertions – that their transactions
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`constitute contracts with Labs and that the Tokens were sold to them
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`by Labs – are wholly unsupported by their own factual allegations and,
`
`in fact, are directly contradicted by other allegations in the Amended
`
`Complaint and documents incorporated by reference. Plaintiffs’ claims
`
`are based on the fundamentally flawed premise that, because Labs
`
`developed the computer code underlying the Protocol, it somehow
`
`“controlled” and “sold” all of the tokens that users later exchanged on
`
`the Protocol. That does not make sense, and the District Court properly
`
`considered the well-pleaded factual allegations and dismissed the
`
`Amended Complaint.
`
`Ultimately, as the District Court recognized, to the extent
`
`Plaintiffs have any cognizable legal claims stemming from their
`
`purchases of the Tokens, the proper defendants would be the issuers of
`
`those Tokens who purportedly defrauded them. Recognizing that
`
`Plaintiffs’ claims were asserted against the wrong parties, the District
`
`Court rejected Plaintiffs’ attempt to hold “a drafter of computer code
`
`underlying a particular software platform” liable for “a third-party’s
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`misuse of that platform.” (SPA31.)
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`4
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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page12 of 50
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`II. Statement of Facts1
`
`A. The Parties
`
`Labs is a software company that is the main contributor to the
`
`Protocol, an open-source protocol for trading certain digital assets. (A34
`
`¶ 52.) Mr. Adams is the founder and CEO of Labs. (A27 ¶ 21.)
`
`The VC Defendants are three unaffiliated and independent
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`venture capital firms that each invest in private companies, such as
`
`Labs. (A28 ¶¶ 22-24, A49 ¶¶ 99-100.) Uniswap Foundation is a
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`nonprofit corporation formed in June 2022 with a mission to support
`
`
`1 The factual allegations in the Amended Complaint are taken as true
`solely for the purposes of this appeal. The District Court properly
`took judicial notice of the Uniswap v2 Whitepaper and the Uniswap
`website, as well as other documents on which Plaintiffs rely in the
`Amended Complaint, and Plaintiffs do not challenge that decision.
`(SPA2 n.1.) See Tongue v. Sanofi, 816 F.3d 199, 209 (2d Cir. 2016)
`(courts may “consider any written instrument attached to the
`complaint, statements or documents incorporated into the complaint
`by reference,” as well as “documents possessed by or known to the
`plaintiff upon which it relied in bringing the suit”) (quoting ATSI
`Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007));
`Cosgrove v. Oregon Chai, Inc., 520 F. Supp. 3d 562, 581 n.5
`(S.D.N.Y. 2021) (courts “may take judicial notice of information
`publicly announced on a party’s website, as long as the website’s
`authenticity is not in dispute and it is capable of accurate and ready
`determination”) (citation omitted). Copies of those documents were
`attached as exhibits to the Declaration of Brandon Fetzer. (A189-
`213.) Citations to “A_” refer to the Appendix filed by Plaintiffs-
`Appellants, and citations to “SPA_” refer to the Special Appendix.
`
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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page13 of 50
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`“the decentralized growth and sustainability of the Uniswap Protocol
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`and its supporting ecosystem.” (A62-63 ¶¶ 159, 163.)
`
`Plaintiffs are six individuals residing in North Carolina, Idaho,
`
`New York, and Australia who allege that they purchased certain
`
`identified Tokens using the Protocol during the period of December
`
`2020 through March 2022. (A24 ¶ 5.)
`
`B. The Protocol
`
`The Protocol is computer code running on the Ethereum
`
`blockchain, which allows users to trade one cryptocurrency token for
`
`another. (A34 ¶ 52.) The first version of the Protocol (“v1”) was
`
`developed by Labs and launched in 2018. (A34 ¶ 51.) Subsequent
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`versions were launched in 2020 (“v2”) and 2021 (“v3”). (A41 ¶ 77, A47-
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`48 ¶ 96.) Although changes are made with each new version, the
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`subsequent versions do not supplant or alter the prior ones, which Labs
`
`cannot change or update, and many users continue to use v1 and v2
`
`despite the availability of v3. (A36 ¶ 57, A47-48 ¶ 96.) The new
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`versions of the Protocol did not fundamentally change the mechanics of
`
`how users trade tokens. (A43 ¶ 81, A47-48 ¶ 96.)
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`6
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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page14 of 50
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`The Protocol is autonomous, decentralized, and immutable; once
`
`launched, it runs entirely independently of Labs (or anyone else). The
`
`Protocol is simply a “system of smart contracts on the Ethereum
`
`blockchain.” (A43 ¶ 81; A203.) Smart contracts are “self-executing,
`
`self-enforcing” computer programs, meaning that no person or entity
`
`controls the Protocol’s operation, restricts who uses the Protocol, or
`
`decides which tokens are traded on the Protocol. (A32 ¶ 42; A212.)
`
`Indeed, for as long as the Ethereum blockchain continues to produce
`
`blocks, the Protocol will operate unaltered. (A208.)
`
`The cryptocurrency tokens traded using the Protocol are known as
`
`“ERC-20 tokens” – tokens created using a technical standard of the
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`Ethereum Protocol known as ERC-20. (A32 ¶¶ 43-44.)
`
`C. Liquidity Pools
`
`Unlike centralized exchanges, where buyers and sellers typically
`
`are matched on a one-to-one basis using a centralized order book, often
`
`with centralized custody, clearing, and settlement, the Protocol is a
`
`decentralized, peer-to-peer system in which tokens are traded by means
`
`of “liquidity pools.” (A31 ¶¶ 38-39, A41-42 ¶¶ 78-79; A192, A197; A203;
`
`A206.) Each pool contains two ERC-20 tokens, each valued relative to
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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page15 of 50
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`the other. (A41 ¶ 78; A203; A206.) As one token is traded for the other,
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`the relative prices of the tokens are automatically adjusted, and a new
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`rate is determined. (A41 ¶ 78; A203; A206.)
`
`Users who place token pairs into liquidity pools are known as
`
`“liquidity providers.” (A31 ¶ 39.) Anyone can become a liquidity
`
`provider by contributing tokens into a pre-existing pool or by creating a
`
`new pool, without permission from Labs or anyone else. (A39 ¶ 72, A41
`
`¶ 77, A45 ¶ 89; A203; A206.) In exchange for providing liquidity, these
`
`users automatically receive “pool tokens” from the Protocol, which
`
`represent their contribution to a pool. (A42 ¶ 79; A203; A206.)
`
`Liquidity providers can later “burn” their pool tokens to retrieve their
`
`contribution to the pool. (A46 ¶ 92; A203; A206.)
`
`The following diagram, which is included in the Amended
`
`Complaint and taken from Labs’s website, illustrates how a liquidity
`
`pool works:
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`8
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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page16 of 50
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`Uniswap Pool
`
`(£) Trade r
`
`(£) Liquidity Provider
`
`(6A·Hi♦
`
`Input:
`
`10 Token A
`
`1 Token B
`
`ll'lput:
`
`10 Token A
`
`0.3 " Fee
`
`o tput
`
`4 LP 5Mres
`
`OUtput
`
`l TOI
`
`B
`
`
`(A41-42 ¶ 78; A203; A206.) On the left-hand side of the diagram is a
`
`liquidity provider. In this particular example, the liquidity provider
`
`deposits 10 “A” tokens and 1 “B” token into a pre-existing liquidity pool,
`
`and it receives 4 pool tokens in return, representing its contribution to
`
`the pool. On the right-hand side of the diagram is a trader who swaps
`
`10 “A” tokens (plus a fee) for 1 “B” token. The trader has no direct
`
`interaction with the liquidity provider; the trader interacts only with
`
`the liquidity pool. (A41-42 ¶ 78.)
`
`Liquidity pools are “smart contracts” that hold the tokens and
`
`enforce the rules for depositing or withdrawing tokens. (A31 ¶ 39, A32
`
`¶ 42, A43 ¶ 81; A203; see also A208 (“It is important to reiterate that a
`
`Pool is just a smart contract, operated by users calling functions on
`
`it.”).) Those rules are written “directly into the program’s code.” (A32
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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page17 of 50
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`¶ 42.) Accordingly, Labs does not have any control over, or any interest
`
`in, the tokens traded on the Protocol.
`
`D. Trading Fees
`
`As shown in the diagram of liquidity pools above, users paid a
`
`0.3% fee to effectuate each trade when using v2 of the Protocol. (A41-42
`
`¶ 78, A46 ¶¶ 91-92; A203; A206.) In v3, there are multiple fee tiers.
`
`(A47-48 ¶ 96.) The trading fee was paid into the liquidity pool and
`
`automatically “distributed pro-rata to all [liquidity providers] in the
`
`pool upon completion of the trade.” (A46 ¶ 92; A192; A203; A206.)
`
`Plaintiffs do not allege that Labs or Mr. Adams was a liquidity provider
`
`for any of the Tokens.
`
`Although the Amended Complaint includes numerous conclusory
`
`allegations suggesting that Labs received fees for trades executed on
`
`the Protocol, Plaintiffs allege no facts supporting that assertion. (A23
`
`¶ 3, A24 ¶ 4, A25 ¶ 9, A26 ¶ 12, A37 ¶ 63, A40-41 ¶ 76, A46 ¶ 91, A67
`
`¶ 178, A67-68 ¶ 180, A170 ¶ 711, A172 ¶ 722.) At the pre-motion
`
`hearing held before the District Court on November 9, 2022, Plaintiffs
`
`expressly disclaimed any suggestion that Labs received such fees. (D.
`
`Ct. Dkt. No. 64 at 26:7-16, 27:4-8.) Likewise, in their briefing before the
`
`10
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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page18 of 50
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`District Court, Plaintiffs “abandon[ed] their theory that Labs collected
`
`fees for its own financial gain.” (SPA48.)
`
`Plaintiffs abandoned that theory for good reason, as it is directly
`
`contradicted by Plaintiffs’ own admissions that trading fees are paid to
`
`the liquidity providers, which Plaintiffs do not allege includes Labs, as
`
`well as by documents incorporated by reference in the Amended
`
`Complaint. (SPA11; A46 ¶ 92 (trading fees “distributed pro-rata to all
`
`[liquidity providers]”); A192 (trading fee “goes to liquidity providers”);
`
`A204 (trading fees “function[] as a payout to LPs”); A207 (trading fees
`
`“distributed pro-rata to all LPs”).) The Court need not accept as true
`
`any allegation that Labs received fees.2
`
`
`2 See Perry v. NYSARC, Inc., 424 F. App’x 23, 25 (2d Cir. 2011) (court
`need not accept as true “factual assertions that are contradicted by
`the complaint itself, by documents upon which the pleadings rely, or
`by facts of which the court may take judicial notice”); Amidax
`Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d 140, 147 (2d Cir. 2011)
`(holding that “where a conclusory allegation in the complaint is
`contradicted by a document attached to the complaint, the document
`controls and the allegation is not accepted as true”); James v. Gage,
`2019 WL 1429520, at *14 (S.D.N.Y. Mar. 29, 2019) (holding that
`“[w]here the plaintiff’s own pleadings are internally inconsistent, a
`court is neither obligated to reconcile nor accept the contradictory
`allegations in the pleadings as true in deciding a motion to dismiss”).
`
`11
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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page19 of 50
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`As Plaintiffs note, v2 of the Protocol includes a “switch” to have a
`
`portion of the trading fee (1/6 of the .3% fee, or .05%) be paid to the
`
`Protocol rather than liquidity providers. (A46 ¶ 91; A203.) The
`
`Amended Complaint does not allege that the Protocol fee switch has
`
`been activated. (SPA48 n.17.) Whether the fee switch is activated at
`
`some time in the future has no bearing on Plaintiffs’ claims, which are
`
`based on transactions that took place years ago.
`
`E. The Interface
`
`
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`The Interface is front-end software developed by Labs that
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`constitutes one way users can access the Protocol – it is one website
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`among many that enable people to more easily interact with the
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`Protocol. (A37 ¶ 64.) Users can reach the Interface by opening up any
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`web browser and navigating to app.uniswap.org. (A37 ¶ 66.) Because
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`the Interface is not the exclusive way to access the Protocol, only some
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`users of the Protocol ever utilize the Interface. (A37 ¶ 64.) Even when
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`a user accesses the Protocol via the Interface, all transactions are
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`executed on the Protocol itself – as is always the case regardless of how
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`the Protocol is accessed. (A37 ¶ 64, A41-42 ¶¶ 78-79.)
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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page20 of 50
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`F.
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`Plaintiffs’ Conflation of Labs, the Protocol, and the Interface
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`In the Amended Complaint, Plaintiffs repeatedly conflate Labs
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`(the software company), the Protocol (the decentralized exchange), and
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`the Interface (the front-end software that can be used to access the
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`Protocol) – using the term “Uniswap” to refer to all three. For example,
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`although “Uniswap” is defined in the Amended Complaint to refer to
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`Labs (A23), it is often used there to refer to the Protocol: “Uniswap’s
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`trading volume” refers to trading on the Protocol (A36 ¶ 57); the
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`issuance of tokens by “Uniswap” refers to the tokens issued by liquidity
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`pools on the Protocol (A42 ¶ 79, A46 ¶ 92); “Uniswap” pools refers to
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`liquidity pools on the Protocol (A65 ¶ 171, A66-67 ¶ 174); and fees
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`generated or charged by “Uniswap” refer to fees paid to liquidity pools
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`on the Protocol (A31 ¶ 40, A37 ¶ 63, A40-41 ¶ 76, A46 ¶ 91, A48 ¶ 98).
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`As the District Court noted, Plaintiffs also use the term “Uniswap”
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`in the Amended Complaint to refer to both the Protocol and the
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`Interface, although “they are indeed distinct.” (SPA22 n.8.) Plaintiffs
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`do so in order to misleadingly suggest that Labs controls trading on the
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`Protocol. (A40-41 ¶ 76, A48 ¶ 97, A54 ¶ 118, A70 ¶ 189.) For instance,
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`Plaintiffs selectively quote from tweets by Mr. Adams to suggest that
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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page21 of 50
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`Labs “maintained complete control over the Protocol,” but those tweets
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`actually make the opposite point, expressly contrasting Labs’s control of
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`the Interface with its lack of control over trading on the Protocol. (A48
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`¶ 97; A210.) The webpage that Plaintiffs cite makes the same point,
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`explaining that the Protocol, as compared to the Interface, “is a set of
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`autonomous, decentralized, and immutable smart contracts.” (A71
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`¶ 190; see also A212.) Thus, Labs may block the use of the Interface for
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`certain users or tokens, but Labs cannot prevent anyone from trading
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`tokens on the Protocol. (A54-55 ¶¶ 118-20, A70-71 ¶¶ 189-190; A210;
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`A212.)
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`On appeal, Plaintiffs continue this conflation of Labs, the Protocol
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`and the Interface. Adding to the confusion, Plaintiffs now properly
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`define “Labs” to refer to Uniswap Labs in their opening brief (App. Br.
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`1) but then provide no definition at all of “Uniswap” despite using that
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`term throughout their brief. Plaintiffs’ continued, deliberate use of
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`“Uniswap” to refer to Labs, the Protocol and the Interface renders much
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`of their brief misleading and incoherent.3
`
`
`3 As in the Amended Complaint, references in Plaintiffs’ opening brief
`to the issuance of tokens by “Uniswap” refer to the tokens issued by
`liquidity pools on the Protocol (App. Br. 9, 19); “Uniswap” pools
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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page22 of 50
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`III. Plaintiffs’ Claims
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`Plaintiff Risley commenced this action on April 4, 2022, asserting
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`claims in connection with six tokens: EthereumMax, Bezoge Earth,
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`Matrix Samurai, Alphawolf Finance, Rocket Bunny and BoomBaby.io.
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`(D. Ct. Dkt. No. 1.)
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`On September 26, 2022, Plaintiffs filed the Amended Complaint,
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`which includes claims regarding an additional 34 tokens: Akita,
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`Archangel, Ares Protocol, Autz, Cyber Doge, Dent, Dogg Token,
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`Ethereum Chain Token, Ethereum Max, FEGtoken, Goku Inu,
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`Hoge.finance, HoloToken, Jupiter, Kawakami Inu, Kishu Inu, The
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`Official Mine Token, Mononoke Inu, Pundi X Token, Saitama, Sanshu
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`Inu, Smooth Love Potion, StarLink, Stoner Doge, Vera, YfDai.finance,
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`Dogelon, HuskyToken, Lorde Edge, Shih Tzu, Wise Token, Lukso
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`Token, Olympus Dao and Samsung Metaverse. (A24 ¶ 5.)
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`Plaintiffs contend that the Tokens were fraudulent “scams” and
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`allege that they were injured when the Tokens decreased in value. For
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`example, Plaintiff Freeland alleges that he purchased approximately
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`refers to liquidity pools on the Protocol (App. Br. 11, 19, 23, 24, 30-
`32); and fees charged or collected by “Uniswap” refer to fees paid to
`liquidity pools on the Protocol (App. Br. 11-12, 24, 32, 35-39).
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`
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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page23 of 50
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`18.6 billion Sanshu Inu tokens for $15.57, and that the value of those
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`tokens had decreased to $1.19 as of June 1, 2022. (A124-126 ¶¶ 475-
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`485; D. Ct. Dkt. No. 28-2 at 16.) Plaintiffs allege that the Sanshu Inu
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`token was “a classic pump and dump scheme,” in which the non-party
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`issuers of Sanshu Inu “enriched themselves” at the expense of
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`purchasers. (A126 ¶ 482.) Plaintiffs make similar allegations
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`regarding the other Tokens, in each case alleging that they were
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`defrauded by the non-party Token issuers. (A72-166 ¶¶ 195-696.)
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`Although Plaintiffs devote five hundred paragraphs of the Amended
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`Complaint to these alleged “scams” by the issuers of the Tokens,
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`Plaintiffs do not allege any facts indicating that Labs or Mr. Adams (or
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`any other Defendant) were even aware of those purported scams, much
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`less that they participated in them.
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`Plaintiffs assert claims under Section 29(b) of the Exchange Act
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`and Section 12(a)(1) of the Securities Act, as well as certain state
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`statutory and common law claims.
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`IV. The District Court’s Dismissal
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`In a thorough, 51-page decision, the District Court dismissed the
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`Amended Complaint in its entirety. (SPA50.) The District Court
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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page24 of 50
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`dismissed Plaintiffs’ Section 29(b) claims on the basis that Plaintiffs
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`failed to identify any contract between any Plaintiff and Defendants
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`that violates the Exchange Act. (SPA29-38.) The District Court also
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`dismissed Plaintiffs’ Section 12(a)(1) claims, holding that Plaintiffs
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`failed to plead that Defendants are “statutory sellers” who passed title
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`or “solicited” Plaintiffs to purchase the Tokens. (SPA38-48.) Finding no
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`primary violation of the securities laws, the District Court dismissed
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`Plaintiffs’ control person claims, and it declined to exercise
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`supplemental jurisdiction over Plaintiffs’ state law claims. (SPA48-50.)
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`SUMMARY OF ARGUMENT
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`
`
`The District Court correctly dismissed Plaintiffs’ federal securities
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`claims because Plaintiffs failed to plead the required elements of those
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`claims.
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`First, Plaintiffs’ claim under Section 29(b) of the Exchange Act,
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`which states that a contract is void if its performance necessarily
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`violates the Exchange Act, fails because Plaintiffs do not identify any
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`contract between any Plaintiff and Labs or Adams, let alone one that
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`requires a violation of the Exchange Act. The mere use by Plaintiffs of
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`software developed by Labs – the Protocol and the Interface – to trade
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`Case 23-1340, Document 66, 04/12/2024, 3619661, Page25 of 50
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