On July 1, Roche Freedman LLP and Schneider Wallace Cottrell Konecky LLP filed a class-action lawsuit in the district court for the northern district of California against Solana Labs.
The lawsuit filed by the two companies is on behalf of a state resident plaintiff Mark Young who accuses the Solana Foundation, Solana Labs, Anatoly Yakovenko, Kyle Samani, Multicoin Capital Management, and FalconX of promoting and selling unregistered securities tokens in the form of Solana coin (SOL) from March 24, 2020. The filing states:
“Defendants made enormous 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 enormous losses.”
With additional allegations that Solana Labs “deliberately misleading statements” regarding the SOL tokens’ total circulating supply, the plaintiff is bringing this action on behalf of himself and other SOL investors.
The lawsuit alleges that Anatoly Yakovenko, the founder of Solana Labs, paid a market maker over 11.3 million SOL tokens in April 2020 while concealing this information from the general public. The lawsuit claims that although the company said it would do so, it only burned 3.3 million tokens.
Solana Labs might face serious difficulties
The verdict in the lawsuit against Solana Labs can have a big impact on Solana and the broader crypto market. If SOL is determined to be a security by a court, it may be removed from popular crypto exchanges. Following the SEC’s soon-to-be-completed case against Ripple, Coinbase and Kraken delisted XRP in late 2020.
The lawsuit comes on top of Solana’s continuous reliability issues, which include at least seven complete or partial network outages in the last year. The complaint specifically referred to these disruptions and claimed that they caused “major losses for network users” since they sharply reduced SOL’s price.
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