June 1, 2022
By Murtuza Merchant
“No-loss lottery” DeFi platform PoolTogether has raised 470.90 Ether (ETH) via NFT sales to fund its legal defense against a putative class action lawsuit.
That means PoolTogether is more than halfway to its goal to raise at least 769 ETH worth roughly $1.5 million to fight what it calls a lawsuit that has “no merit”. The platform has another 21 days to go before the NFT funding campaign ends. It noted on its NFT minting page:
“PoolTogether Inc. is a defendant in a putative class action lawsuit. A person deposited the equivalent value of $12.00 into the protocol and is now suing PoolTogether Inc. and others for substantial damages.”
The class-action lawsuit is led by the former technology lead for Senator Elizabeth Warren’s 2020 presidential campaign, Joseph Kent, who after depositing roughly $12 worth of stablecoins into the protocol, took action against the project, its founder Leighton Cusack and several of its affiliated partners in January
According to an amended complaint from February, Kent alleges that PoolTogether is operating an illegal lottery in New York, and argues that the platform “may never offer a positive expected value” due to keeping as much as 50% of each weekly prize as a reserve.
Kent is seeking compensation worth double the value of funds he spent on purchasing lottery tickets in PoolTogether, and double the reasonable amount of attorney’s fees and costs of legal action.
PoolTogether claims to offer risk-free lotteries on stablecoin deposits in the platform by using ticket-buyers and liquidity providers’ capital to generate interest using DeFi lending protocols.
The winner of the lottery receives the lion’s share of the yield, while a handful of runner-ups receive a smaller share. All other participants receive a full refund. According to PoolTogether’s website, it currently offers $80,436 worth of weekly prizes across its V3 and V4 pools.
About the author
Murtuza Merchant is a senior journalist and an avid follower of blockchain and cryptocurrencies.