Solana Foundation Slapped With Class Action Lawsuit Alleging SOL Is a Security
Could a class action lawsuit filed against the creators and early investors in Solana (CRYPTO: SOL) impact your ability to invest in crypto? Some commenters worry it might. A new lawsuit circulates around the question of whether cryptocurrency is a security. Alleging that the defendants were involved in illegal securities trading, the suit could be a harbinger of disruptive rulings revisiting whether crypto is a security and whether non-accredited investors can participate – or it could be a nothingburger. Although this suit uses some of Solana's problematic features to argue it is a security, many similar lawsuits have been filed against various crypto entities and businesses using similar lines of reasoning.
On July 1st, a class action lawsuit was filed against Solana Labs, the Solana Foundation, Solana Labs CEO Anatoly Yakovenko, the venture capital firm Multicoin Capital, and its CEO, Kyle Samani. Filed by lead plaintiff Mark Young "on behalf of all investors who purchased Solana tokens," the suit alleges that Solana Labs' negotiations prior to their initial coin offering (ICO, the crypto world's equivalent of an IPO) constitute multiple violations of the Securities Act. Deploying the Howey test (a court precedent for determining whether something is an investment contract), the suit alleges that SOL is an unregistered security. The suit claims the defendants used a series of negotiations to sell lots of SOL among themselves at rock-bottom prices, and then chose to sell relatively few SOL at much higher prices during the public ICO in order to maintain control over the platform before dumping SOL on gullible investors.
The core questions in the lawsuit relate to both the specifics of Solana and to crypto investing in general – and that is what concerns some crypto commenters. The complaint alleges that Solana creators used a series of private deals and their ICO to deliberately centralize and consolidate control of both the tokens and the network infrastructure. Many have criticized Solana for its centralization: Its network and governance structures make it possible for some stakeholders to have more power than others.
Source Fool.com
