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The developer, founder, and partners of the network are accused of profiting from the sale of an unregistered security.
Blockchain at Layer 1 Mark Young, a token investor, has filed a class-action lawsuit against Solana (SOL) in California.
The Solana Foundation, Anatoly Yakovenko, Solana Labs, Multicoin Capital, and FalconX profited from the sale of an unregistered security, according to the court filing.
Mark Young purchased SOL between August and September 2021, but soon discovered that the token was an unregistered security, resulting in massive losses for retail investors in the United States.
SOL sales benefited the founder and his partners.
According to the lawsuit, the defendants, such as Multicoin Capital, promoted the tokens after purchasing them for $0.4 in 2019 and profitably selling millions of SOL to retail investors. Multicoin Capital is accused of dumping SOL tokens through FalconX.
During the crypto market's bull run, Solana reached a high of $258 in November 2021. According to the lawsuit, this was made possible by the defendants' efforts, and they profited from the massive increase in value while the average investor lost money.
Solana's decentralization claims are being questioned.
The 40-page lawsuit also contested Solana's claim of decentralization.
According to Young, insiders own 48 percent of SOL's total supply as of May 2021, while the Solana Foundation owns 13 percent, making it very centralized.
“Because Solana Labs and its insiders directly control more than 50% of the total SOL supply significantly, the underlying value of SOL depends primarily on the efforts taken by Defendants.”
Additionally, the lawsuit said that Solana’s frequent network outages showed that it is centralized. It said:
“The defendants and their engineers unilaterally shut the entire Solana blockchain off for hours to address this issue.”
Layer-1 blockchain Solana (SOL) is facing a class-action lawsuit in California brought by Mark Young, a token investor.
The Solana Foundation, Anatoly Yakovenko, Solana Labs, Multicoin Capital, and FalconX profited from the sale of an unregistered security, according to the court filing.
Mark Young purchased SOL between August and September 2021, but soon discovered that the token was an unregistered security, resulting in massive losses for retail investors in the United States.
SOL sales benefited the founder and his partners.
According to the lawsuit, the defendants, such as Multicoin Capital, promoted the tokens after purchasing them for $0.4 in 2019 and profitably selling millions of SOL to retail investors. Multicoin Capital is accused of dumping SOL tokens through FalconX.
During the crypto market's bull run, Solana reached a high of $258 in November 2021. According to the lawsuit, this was made possible by the defendants' efforts, and they profited from the massive increase in value while the average investor lost money.
Solana's decentralization claims are being questioned.
The 40-page lawsuit also contested Solana's claim of decentralization.
According to Investopedia, insiders own 48 percent of SOL's total supply as of May 2021, while the Solana Foundation owns 13 percent, making it very centralized.
"SOL securities purchasers have invested money or provided valuable services to a common enterprise, Solana." These buyers have a reasonable expectation of profit based on the promoters' efforts, Solana Labs and the Solana Foundation, to build a blockchain network that will compete with Bitcoin and Ethereum and become the accepted framework for blockchain transactions."
Roche Freedman LLP and Schneider Wallace Cottrell Konecky represent Young. Roche Freedman LLP is suing Binance.US for promoting Terra's UST and LUNA tokens.
Solana had yet to respond to the lawsuit as of press time.
What does this mean for other cryptocurrencies?
One of the most pressing issues in the crypto industry is determining whether or not an asset is a security.
According to SEC Chairman Gary Gensler, the majority of cryptocurrencies on the market could be classified as securities.
The only exception, according to Gensler, is Bitcoin (BTC).
The SEC is currently investigating Ripple (XRP) for selling unregistered securities. The outcome of this case could have ramifications for other altcoins.
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