Solana Labs is the latest crypto company to be sued accused of promoting unregistered security.
The class action was filed July 1 by Roche Freedman LLP and Schneider Wallace Cottrell Konecky in district court for the northern district of California on behalf of plaintiff Mark Young, a citizen.
Claim accuse Solana Labs, the Solana Foundation, Anatoly Yakovenko, Multicoin Capital Management, Kyle Samani, and FalconX, are selling unlisted securities tokens in SOL form beginning March 24, 2020.
“The defendants made huge 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 huge losses.”
Plaintiffs took action on behalf of themselves and other SOL investors with further claims Solana Labs “deliberately misleading statements” about the total circulation of SOL tokens.
According to the lawsuit, Solana Labs founder Anatoly Yakovenko lent the market maker more than 11.3 million tokens in April 2020 and failed to disclose the information to the public. The company said it would reduce supply by that amount but only burn 3.3 million tokens, the lawsuit claims.
Plaintiffs also disagreed with Solana’s claims about decentralization. “In May 2021, insiders hold 48% of SOL’s supply. The network becomes very centralized,” he added.
The outcome of the lawsuit could have significant implications for Solana and the broader crypto industry. SOL may be removed from a superior crypto exchange if it is considered a security by the courts. Coinbase and Kraken delisted XRP in late 2020 after SEC lawsuit against Ripplewhich is soon done.
The setting is at the top of the Solana event woes reliability, with the network having experienced at least seven complete or partial deaths in the past 12 months. The outages were mentioned in the filing with the claim that it caused “substantial losses to network users” because it caused the value of SOL trades to drop dramatically.
The SOL price is down 85% from its Nov. 6 high of $ 260 and is currently trading at less than $ 40, according to it CoinGecko.
Solana Labs and Multicoin Capital were contacted for comment but did not respond when this article was published.