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- \u201cDefendants made enormous profits through the sale of SOL securities to retail investors,\u201d the plaintiff has alleged<\/li>\n
- The lawsuit paints SOL as a highly centralized cryptocurrency that has benefited company insiders<\/li>\n<\/ul>\n<\/div>\n
A Solana investor has filed a class action lawsuit<\/a> against key parties in the Solana ecosystem for allegedly making misleading statements and profiting from selling unregistered securities to retail customers.<\/p>\n
The plaintiff, Mark Young, filed the suit on July 1 against Solana Labs, Solana Foundation, Solana CEO Anatoly Yakovenko<\/a>, crypto investment firm Multicoin Capital<\/a> and its co-founder Kyle Samani, as well as trading platform FalconX<\/a>.\u00a0<\/p>\n
\u201cDefendants 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,\u201d Young, who said he bought SOL tokens in 2021, wrote. <\/p>\n
The lawsuit was filed on behalf of investors who purchased Solana tokens between March 24, 2020 and the filing date, he said.<\/p>\n
Solana Labs and Multicoin Capital didn\u2019t return Blockworks\u2019 request for comment. Yakovenko and Samani could not be reached. FalconX declined to comment.<\/p>\n
Court docs 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 per token and market value to $77 billion as of November 5, 2021.<\/p>\n
\u201cThese promotional efforts took SOL securities from a relatively obscure crypto-asset to one of the top crypto-assets in the world,\u201d he wrote.<\/p>\n
\u201cSamani 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,\u201d he added, referring to multiple snafus over the past year, including an outage lasting over 10 hours<\/a> in September 2021.<\/p>\n
The plaintiff also said the defendants made misleading statements regarding the supply of SOL and its decentralized nature, and claimed company insiders held a substantial percentage of tokens.<\/p>\n
\u201cAs of May 2021, insiders held 48% of the SOL supply. The network is thus highly centralized,\u201d Young claimed.<\/p>\n
He alleged Yakovenko raised private funding in multiple rounds by selling SOL securities at low prices. And in one such \u201cseed sale,\u201d Solana sold \u201cthe future rights\u201d to nearly 80 million SOL tokens for $3.17 million ($0.04 per token) in April 2018, the filing claims. It adds that the defendants chose to sell only a small amount of its token supply (less than 2%) in its 2020 Initial Coin Offering, which priced SOL tokens at $0.22, according to CryptoRank<\/a>.<\/p>\n
\u201cDefendants did this to ensure they had de facto control over the Solana blockchain and to artificially drive down the available supply of SOL securities through coordination amongst themselves,\u201d the plaintiff wrote.<\/p>\n
Young also said Multicoin profited from offloading millions of SOL tokens onto retail investors, while using over-the-counter (OTC) trading desks like FalconX to act as a broker.<\/p>\n
Solana\u2019s SOL is down 78% so far this year, and has fallen 12% in the last month to $36.85, data from Blockworks Research<\/a> shows. The token\u2019s losses in June were spurred by blockchain downtime<\/a> that prevented transactions from being validated for over four hours.<\/p>\n
Young\u2019s case, filed in the Northern District of California, is represented by law firms Roche Freedman and Schneider Wallace.\u00a0<\/p>\n
Roche Freedman has filed numerous lawsuits against other cryptocurrency firms in the last year, including crypto exchanges Binance US<\/a> and KuCoin<\/a>, alleging execution of illegal trades or violation of securities law in relation to tokens such as Terraform Labs\u2019 failed stablecoin UST, EOS and TRX. <\/p>\n
In December, Roche Freedman also secured a $100-million verdict<\/a> in a lawsuit against self-proclaimed Bitcoin creator Craig Wright.<\/p>\n
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