Lawyers in the lawsuit against Solana claim that its native token is a centralized asset. They further say it is riddled with insider trading to the disadvantage of retailers.
Too Strong Allegations
Solana labs have become the most recent crypto firm to be entangled in a lawsuit. The lawyers went ahead to say it is unregistered security altogether.
The lawsuit was filed in July by Schneider Wallace Cottrell Konecky and Roche Freedman LLP. It was brought before the district court in North California for Malik Young, the plaintiff.
The lawsuit joins Solana Labs, Anatoly Yakovenko, the Solana Foundation, Multicoin Capital Management, FalconX, and Kyle Samani. It accuses them of trading unregistered security tokens, SOL, from the 4th of March, 2020.
The lawsuit claims that the defendants made huge profits from selling SOL securities to retailers. It further says it is in violation of the US registration provision of security laws. This has led investors to lose a lot of their funds, the lawsuit claims.
The plaintiff’s suit is for himself and on behalf of other investors. The suit claims further that Solana Labs makes misleading comments about its token in supply. It says Solana Labs misleads the public by a deliberate effort.
The lawsuit says, the founder of Solana Labs loaned 11.3m tokens to a market maker in 2020. The document claims that Anatoly Yakovenko, the founder did not disclose the dealings as required. The company promised to reduce its market supply by the same amount but burnt 3.3m tokens.
Further umbrage from the plaintiff includes the company’s claim to be decentralized. The document says insiders held 48% of SOL market supply as of May 2021. It says the network is, therefore, a highly centralized one.
If True, the Future Might Not Be Bright
Whatever the outcome of the lawsuit, it could be significant for Solana. It would also have a reverberating effect throughout the general crypto market. SOL might get pulled off top crypto exchanges if the court deems it security.
Kraken and Coinbase delisted XRP after the US SEC sued Ripple in 2020. The case is to be concluded soon.
This lawsuit is coming in addition to the recent troubles Solana is going through. The network has had seven outages of different degrees in the last 12 months. The lawsuit mentioned the outages and claimed they cause huge losses to users.
SOL value dropped by about 85% from its all-time high of $260. The token is presently trading below $40 as reported by CoinGecko.
Solana is yet to respond to any of these allegations.