Solana Labs is the newest crypto company to be hit with a lawsuit condemning it for endorsing unregistered security. Plaintiffs claim that Solana’s SOL token is centralized security with insiders profiting enormously while retail traders got rekt.
Roche Freedman LLP and Schneider Wallace Cottrell Konecky filed the class action on July 1 in the district court for the northern district of California on behalf of plaintiff Mark Young, a state resident.
The lawsuit blames Solana Labs, the Solana Foundation, Anatoly Yakovenko, Multicoin Capital Management, Kyle Samani, and FalconX, for trading unregistered securities tokens in the form of SOL from March 24, 2020.
“Defendants made enormous profits through the sale of SOL securities to retail investors in the United States in violation of the registration provisions of federal and state securities laws, and the investors have suffered enormous losses,”
The plaintiff is taking action for himself and other SOL investors with additional claims that Solana Labs “deliberately misleading statements” regarding the total circulating supply of SOL tokens.
The lawsuit stated, that Solana Labs founder Anatoly Yakovenko rented a market maker more than 11.3 million tokens in April 2020 and failed to reveal this information to the public. The company stated it would decrease the supply by this amount but only burnt 3.3 million tokens, the lawsuit claims.
The plaintiffs also took affront with Solana’s claims of being decentralized. “As of May 2021, insiders held 48% of the SOL supply. The network is thus highly centralized,” it added.
The lawsuit’s consequence could have substantial allegations for Solana and the broader crypto industry. SOL may be delisted from leading crypto exchanges if it is estimated to be a security by a court. Coinbase and Kraken delisted XRP in late 2020 following the SEC’S lawsuit against Ripple, which is soon to be concluded.
The suit comes on top of Solana’s ongoing reliability woes, with the network having ached at least seven full or partial outages over the past 12 months. These outages were stated in the filing with claims they resulted in “major losses for network users” as they caused the trading value of SOL to fall intensely.
According to CoinGecko, SOL prices have tanked 85% from their November 6 all-time high of $260 and are currently trading at a little under $40.
Solana Labs and Multicoin Capital were communicated for comment but had not replied by the time this article was published.
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