Solana Labs Accused Violating Law

The blockchain under scrutiny

Solana Labs is on the receiving end of a class-action lawsuit that was recently filed in California. The lawsuit accuses states that the token SOL is unregistered security that has helped insiders benefit while retail customers have suffered. The lawsuit also alleges that the cornerstone of SOL value lies in the sum of Solana Labs, Solana Foundation, and the management and implementation of the Solana blockchain.

The lawsuit was first filed by a Californian by the name of Mark Young who bought SOL in the late summer of 2021. Young goes on to name Solana Labs, The Solana Foundation, Anatoly Yakavenko, VC giant Multicoin Capital, Kyle Samani of Multicoin, and FalconX — a trading desk. At the time of this writing, the companies involved in the suit denied comment.

In creating his lawsuit Mr. Young used what is known as the Howey Test. This test is commonly used by the Supreme Court to gauge whether the sale of something is a security or not. The reasoning used for the lawsuit is that Purchasers bought the SOL “securities” and have invested money or given services to a common enterprise, that enterprise being Solana.

The statement goes on to say that purchasers have a right to expect profit based upon the efforts of the ones that promote the token- Solana Labs, The Solana Foundation, and the other teams that build and promote the ecosystem. The statement concludes that the promoting team promised a platform that would rival that of Ethereum or Bitcoin thus addressing the three parts of the Howey Test. Solana Labs signed A Form D with the U.S SEC, this form stated that SOL was exempt from SEC registration. The company stated that they were selling “future rights” to 80 Million SOL at the time.

The lawsuit also claims that Multicoin offloaded millions of dollars in SOL using FalconX OTC desks after heavily promoting the token despite the issues the platform is having. The law firm that is aiding Young is Roche Freedman a firm that has also filed suit against Binance.US for its part in the Terra debacle.

Solana has been having issues with the blockchain with multiple security attacks, slowdowns, and all-out stoppages. With the release of its newer version, most of the issues that were plaguing the blockchain have been rectified and transactions are even smoother than before.

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