Solana Labs, Multicoin Capital Accused of Violating US Securities Law by SOL Investors in Lawsuit

The lawsuit paints SOL as a highly centralised cryptocurrency that has benefited company insiders.

By Shomik Sen Bhattacharjee | Updated: 8 July 2022 17:30 IST

Photo Credit: Unsplash/ Amjith S

Solana Labs has been slammed with a class-action lawsuit in California

Highlights

The lawsuit was filed on behalf of investors who purchased Solana tokens
The defendants expected to derive profits from investing in Solana
Young alleges the way SOL was created and sold meets the Howey test

A Solana investor has filed a class-action lawsuit against key parties in the Solana ecosystem for allegedly making misleading statements and profiting from selling unregistered securities to retail customers. The plaintiff, Mark Young, filed the suit on 1 July against Solana Labs, Solana Foundation, Solana CEO Anatoly Yakovenko, crypto investment firm Multicoin Capital and its co-founder Kyle Samani, as well as trading platform FalconX. Young is working with law firms Roche Freedman and Schneider Wallace Cottrell Konecky concerning the case.

According to the lawsuit, Solana Labs and others sold SOL as securities without a security statement. The plaintiff also claims that the defendants promoted these alleged unregistered securities. Young said he bought SOL in September 2021 while adding that the native token meets the Howey Test to determine if an asset is a security.

The filing states, "Purchasers who bought SOL securities have invested money or given valuable services to a common enterprise, Solana. These purchasers have a reasonable expectation of profit based upon the efforts of the promoters, Solana Labs and the Solana Foundation, to build a blockchain network that will rival Bitcoin and Ethereum and become the accepted framework for transactions on the blockchain."

[Sponsored] Samsung Galaxy S24: The Ultimate Camera Phone With Smarter On-Device AI

One of the allegations Solana Labs is facing in the lawsuit is that SOL is centralised crypto that the defendants benefitted from. Young claims the defendants profited to the detriment of retail investors' capital. He also pointed to the sales of the native token or agreements to sell the token before its public sale.

Court documents show Young has alleged the defendants spent exorbitant sums to promote SOL in the US since April 2020, which supposedly boosted its price to $258 (roughly Rs. 20,420) per token and market value to $77 billion (roughly Rs. 6,09,413 crore) as of 5 November 2021.

“These promotional efforts took SOL securities from a relatively obscure crypto-asset to one of the top crypto-assets in the world,” Young wrote.

Huobi Subsidiary Receives FinCEN License of Operation in the US

“Samani and Multicoin continuously flogged SOL securities, inflating its market price from below a dollar to hundreds of dollars, persisting in their promotional efforts even after it was clear that Solana had serious outages and technical issues,” he added.

It is worth noting that the cryptocurrency market and the top tech stocks globally have been on a tumultuous season in the investment area for the past few weeks. Several problems have caused the bloodbath that many crypto tokens are experiencing today, including SOL.

Moreover, above many crypto tokens in the space, SOL created huge profits for most of its investors last year. As many may remember, SOL was one of the fastest-growing tokens in the space, which even recorded an all-time high of around $260 (roughly Rs. 20,420) in November 2021. It also attracted investment from one of the richest men in crypto, Sam Bankman-Fried — the co-founder and CEO of major crypto exchange FTX.

What are the best tablets? We discuss this on Orbital, the Gadgets 360 podcast. Orbital is available on Spotify, Gaana, JioSaavn, Google Podcasts, Apple Podcasts, Amazon Music and wherever you get your podcasts.

Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks. The information provided in the article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any sort offered or endorsed by NDTV. NDTV shall not be responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained in the article.

Affiliate links may be automatically generated - see our ethics statement for details.

Comments

For the latest tech news and reviews, follow Gadgets 360 on X, Facebook, WhatsApp, Threads and Google News. For the latest videos on gadgets and tech, subscribe to our YouTube channel. If you want to know everything about top influencers, follow our in-house Who'sThat360 on Instagram and YouTube.