Peter Johnson, a MakerDAO user, is leading a class action lawsuit against the Maker Foundation for $45 million following the mass collateral liquidations that occurred on March 12-13.

Essentially, MakerDAO operates on a collateral system, where borrowers put up Ethereum (ETH) and other cryptocurrencies as collateral and then receive a Dai stablecoin loan. The point of this system is that borrowers can access some of the value of their crypto, but receive their crypto back at a later time when they pay back the loan.

However, the crypto market crashed so quickly on March 12-13 that borrowers had little to no chance to increase their collateral positions in order to avoid liquidation, and a vast amount of collateral was liquidated.

Even worse, the MakerDAO system had an error, and millions of dollars of collateral was sold for $0, putting MakerDAO into debt. Although MakerDAO has resolved its debt via auctioning off Maker (MKR) tokens, the users who had their collateral liquidated for $0 still have not been compensated in any way.

Essentially, MakerDAO is supposedly designed so that users can only lose 13% of their collateral maximum. When collateral is sold off a portion of the proceeds from the liquidation are sent to the user who had their collateral liquidated. However, in this case the system failed and some users received $0 from their collateral being liquidated. This is the key point of this lawsuit.

Notably, the Maker Foundation has been distancing itself in recent weeks from MakerDAO under the guise that it is ready to make MakerDAO fully decentralized. However, it seems possible that the Maker Foundation is trying to cut ties with MakerDAO to avoid lawsuits following the March 12-13 debacle. That being said, there is no way for the Maker Foundation to avoid lawsuits like this now that the cat is out of the bag.