Plaintiffs say that Solana’s SOL token is centralized security in which insiders made a lot of money while regular traders lost a lot.
Solana is the latest cryptocurrency company 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 lawsuit of selling unregistered securities tokens in the form of SOL beginning 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 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 lawsuit, Solana Labs founder Anatoly Yakovenko lent 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 lawsuit, the firm stated that it would limit the supply by this amount but only burned 3.3 million tokens.
The plaintiffs also took issue with Solana’s assertions of decentralization. “Insiders controlled 48 percent of the SOL supply as of May 2021.” As a result, the network is excessively centralized,” it noted.
The outcome of the lawsuit might have far-reaching consequences for Solana and the broader 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 full 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 dramatically.
According to CoinGecko, SOL prices have dropped 85 percent from their all-time high of $260 on November 6 and are now selling at just under $40.
