Plaintiffs contend that Solana’s SOL token is centralised security in which insiders benefit enormously while regular traders lose money.
Solana Labs is the latest cryptocurrency firm to be sued for advertising unregistered security. The class action was filed on July 1 in the district court for the northern district of California by Roche Freedman LLP and Schneider Wallace Cottrell Konecky on behalf of plaintiff Mark Young, a state resident.
Solana Labs, the Solana Foundation, Anatoly Yakovenko, Multicoin Capital Management, Kyle Samani, and FalconX are accused in the complaint of selling unregistered securities tokens in the form of SOL beginning March 24, 2020.
“Defendants generated huge profits by selling SOL securities to retail investors in the U.S. in violation of federal and state securities regulations, and investors incurred enormous losses,”
The plaintiff is suing on behalf of himself and other SOL investors, alleging that Solana Labs made “deliberately deceptive assertions” about the total circulating amount of SOL tokens.
According to the complaint, Solana Labs founder Anatoly Yakovenko loaned more than 11.3 million tokens to a market maker in April 2020 and neglected to disclose this information to the public. According to the complaint, the firm said that it would limit the supply by this amount but only burned 3.3 million tokens.
The result of the case might have far-reaching consequences for Solana and the larger crypto sector. If a judge rules that SOL is a security, it may be delisted from major cryptocurrency exchanges. Coinbase and Kraken delisted XRP in late 2020 as a result of the SEC’s pending litigation against Ripple.
The complaint comes on top of Solana’s continuous dependability issues, with the network experiencing at least seven complete or partial outages in the last year. These interruptions were noted in the petition, along with assertions that they caused “substantial losses for network users” by causing the trading value of SOL to plummet drastically.
According to CoinGecko, SOL prices have dropped 85 percent from their all-time high of $260 on November 6 and are now selling at a little under $40.
Solana Labs and Multicoin Capital were approached for comment but had not reacted by the time this story was published.