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Plaintiffs claim that Solana’s SOL token was a centralized security where insiders made huge profits while retail traders were rekt.
Solana Labs is the latest company in crypto to be sued for promoting unregistered security.
Roche Freedman LLP filed the class action on July 1, for plaintiff Mark Young, a California resident. Schneider Wallace Cottrell Konecky and Roche Freedman LLP also filed the class action in the Northern District Court of California.
The lawsuit charges Solana Labs and the Solana Foundation with selling unregistered securities tokens under the Solana name ( SOL ) starting March 24, 2020.
“Defendants made huge profits selling SOL securities to US retail investors, in violation of the registration provisions in federal and state securities laws. Investors have suffered immense losses.”
The plaintiff is suing on behalf of himself as well as other SOL investors. He also claims that Solana Labs made “deliberately misleading statements” about the total circulating supply SOL tokens.
According to the lawsuit Anatoly Yakovenko, founder of Solana Labs, lent more than 11.3million tokens to a market maker in April 2020. However, he failed to disclose this information. According to the lawsuit, although the company claimed it would reduce supply by this amount, it only burned 3.3 millions tokens.
Also, the plaintiffs took offense at Solana’s claim of being centralized. “Insiders controlled 48% of the SOL supply as of May 2021.” It added that the network is therefore highly centralized.”
The outcome of the lawsuit could have important implications for Solana as well as the wider crypto industry. If a court deems SOL a security, it could be removed from the top crypto exchanges. After the SEC lawsuit against Ripple in late 2020, Coinbase and Kraken have delisted Ripple ( XRP), which is expected to be resolved soon.
This suit is in addition to Solana’s ongoing reliability woes. The network has suffered at least seven outages or partial outages during the past twelve months. These outages were cited in the filing, with claims that they resulted “major losses to network users” as they caused SOL’s trading value to plummet dramatically.
SOL prices are down 85% since November 6, when they hit a record high of $260. They currently trade at just under $40, according to CoinGecko.
Multicoin Capital and Solana Labs were both contacted to comment, but they had not replied by the time this article was published.
The post Lawsuit States Solana SOL is an Unregistered Security with insiders Profiting first appeared on The Daily Encrypt.
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