Key members of the Solana ecosystem are the target of a class-action lawsuit filed last week before a court in California. They are accused of illegally benefitting from SOL, the blockchain’s native token, which the lawsuit claims is an unregistered security.
The suit alleges,
“The cornerstone of the value of SOL securities is the sum of Solana Labs, Solana Foundation, and [Anatoly] Yakovenko’s management and implementation of the Solana blockchain.”
The aforementioned lawsuit characterized SOL as a highly centralized cryptocurrency, one that favors its insiders at the expense of regular traders.
So, what is this about?
By breaking federal securities laws, Solana Labs, its Foundation, co-founder Anatoly Yakovenko, Multicoin Capital Management, Kyle Samani, and FalconX, according to Mark Young, a California resident, are all responsible.
The district court in California received the class-action lawsuit filing. It asserts that the defendants advertised the allegedly unregistered securities and offered SOLs as securities without filing any registration statements.
Similar allegations of securities violations have been made against numerous other cryptocurrency startups over the years. In this particular case, the plaintiff claims that he has suffered losses and is obligated to initiate the lawsuit as a result.
According to the petition, SOL is a centralized cryptocurrency from which the defendants profited at the expense of capital from individual investors. None of the defendants have responded to the lawsuit with a statement yet.
According to the lawsuit, the altcoin meets the Howey Test’s requirements and qualifies as a security.
In fact, Young also touched upon several SOL token sales or agreements to sell SOL tokens in the filing, well before the token’s initial public offering. According to a Form D that Solana Labs submitted to the SEC, the business sold “the future rights” to over 80 million SOL and noted that the deal was exempt from SEC registration.
A fight on the charts
The recent market crash has hurt many cryptocurrency projects and businesses, but Solana does not seem to be taking as much of a hit as its competitors. A Series B group of investors has just invested $130 million in Magic Eden, a Solana-based NFT marketplace. Additionally, NFT sales just hit an all-time high of $2 billion on the blockchain.
The Solana Foundation and Solana Ventures also established a $100 million fund to support Web3 startups in South Korea. The ecology appears to be flourishing based on these developments, but only time will tell if it can live up to expectations.