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Solana Sued for Making False Claims and Being ‘Centralized’

Solana Sued for Making False Claims and Being 'Centralized'
Californian Mark Young asserts that significant figures in the Solana ecosystem deceived investors and sold them unregistered securities.

A Solana investor launched a class action lawsuit against important Solana ecosystem participants for allegedly making false claims and generating money by offering unregistered securities to retail buyers.

Mark Young, the plaintiff, filed the lawsuit on July 1 against Solana Labs, Solana Foundation, CEO Anatoly Yakovenko of Solana, Multicoin Capital, and Kyle Samani, the company’s co-founder, and crypto trading platform FalconX.

“This is a class action on behalf of all investors who bought Solana tokens from the defendants between March 24, 2020, and the present. These tokens are unregistered securities. Defendants sold SOL securities to retail investors in the United States without violating the registration needs of federal and state securities laws, and the investors have incurred significant losses as a result.” wrote Young, who claimed to have purchased SOL tokens in 2021.

As per him, the lawsuit was brought on behalf of investors who bought Solana tokens between March 24, 2020, and the filing date.

Other Allegations of Young

Young claims in the filing that the defendants spent excessive sums promoting SOL in the US starting in April 2020. This caused its price to increase to $258 per token, and its market value reached $77 billion as of November 5, 2021.

SOL securities “went from a relatively obscure crypto-asset to one of the top crypto-assets in the world thanks to these promotional activities,” he stated.

He went on to say that

“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 was referring to various hiccups over the previous year, including an outage that lasted more than 10 hours in September 2021.

In addition, the plaintiff asserted that the defendants misrepresented SOL’s supply and decentralized nature and that insiders of the business held a sizable portion of the tokens.

Insiders held 48 percent of the SOL supply as of May 2021. Therefore, the network is quite centralized, according to Young.

He said Yakovenko obtained private capital in several rounds by offering SOL securities for a discount. Furthermore, according to the filing, Solana sold “the future rights” to about 80 million SOL tokens for $3.17 million ($0.04 per token) in one such “seed sale” in April 2018. It further states that the defendants decided to only sell a limited portion (less than 2 percent) of its token supply during its 2020 Initial Coin Offering, which set the price of SOL tokens at $0.22, according to CryptoRank.

SOL Not Really Decentralized

The plaintiff claimed that the defendants had worked to artificially reduce the quantity of SOL securities and ensure that they had de facto control over the Solana blockchain.

Additionally, according to Young, Multicoin made money by selling millions of SOL tokens to retail investors while acting as a broker via over-the-counter (OTC) trading desks like FalconX.

Solana’s SOL has already lost 78 percent of its value this year and 15 percent in the last month, down to $38.24. The unavailability of the blockchain in June, which prohibited transactions from being validated for more than four hours, was the cause of the token’s losses.

Attorneys Roche Freedman and Schneider Wallace defend Young in his case, which was filed in the Northern District of California.

Roche Freedman had also filed multiple lawsuits against many cryptocurrency businesses in the past year, such as crypto exchanges Binance US and KuCoin, accusing implementation of illegal transactions or infringement of equities law regarding tokens like the unsuccessful stablecoin UST, EOS, and TRX from Terraform Labs.

In a lawsuit against the purported inventor of Bitcoin, Craig Wright, Roche Freedman also won a $100 million award in December.