Amid Bearish Market, Solana Is Slapped With A Class-Action Lawsuit

An investor in Solana's governance token SOL, Mark Young, has filed a lawsuit against Solana Labs and accused it of promoting Solana’s native token SOL as an unregistered security.

Law firms Roche Freedman LLP and Schneider Wallace Cottrell Konecky filed the lawsuit against the firm, known for working on the development of the Solana blockchain, on behalf of Young on July 1 in the U.S. District Court for the Northern District of California.

The plaintiff mentioned some big names in the lawsuit.

A bearish market coupled with a lawsuit might put SOL investors at the risk of losing their investments.

Young pointed out in the lawsuit that Solana CEO Anatoly Yakovenko, investment firm Multicoin Capital and its co-founder Kyle Saman along with crypto platform FalconX all promoted Solana and benefited from its price surge witnessed last year.

"Defendants made enormous profits through the sale of Solana (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," the lawsuit claims.

Furthermore, it also claims that the creators of the project allocated a significant portion of the total SOL supply to the company's insiders and associates which held a total of 48% of SOL supply in May 2021 when Young first invested in SOL.

“Defendants deliberately chose to sell only a small amount of its token supply (less than 2%) in its 2020 ICO. Defendants did this to (1) ensure they had de facto control over the Solana blockchain and (2) to artificially drive down the available supply of SOL securities through coordination amongst themselves,” reads the filing.

The Solana foundation, another firm dedicated to the blockchain's development, allegedly owned 13% of the SOL supply and also profited from SOL's bullish price surge last year.

Interestingly, the lawsuit also adds that Multicoin Capital Management LLC and co-founder Saman bought SOL at just $0.40 in 2019 during the ICO. Thereafter, they relentlessly promoted SOL only to capitalize on their profits in 2021 and dump their holdings on investors.

Solana has yet to give a statement regarding the accusations by Young.

As per CoinMarketCap (CMC), Solana is currently the ninth biggest cryptocurrency in the market and is nearly 86.25% down from its all-time high witnessed on Nov. 6, 2021, at a price of $260. The price of 1 SOL as of 12:05 a.m. ET was $35.75.