Solana Ecosystem Sued for Securities Violations and ‘Illegal Profiting’

Solana is being sued in a California federal court by an investor who claims major players in the ecosystem have been illegally profiting from SOL, the blockchain’s native token.

Mark Young alleges that Solana Labs, its Foundation, co-founder Anatoly Yakovenko, Multicoin Capital Management and its co-founder Kyle Samani, and FalconX all violated federal securities laws.

The class-action lawsuit was filed in a district court in California. It claims that the defendants had sold Solana as securities without any registration statement and promoted those allegedly unregistered securities. 

These securities violation claims are similar to those many other crypto companies have faced in recent years.

Law firms Roche Freedman and Schneider Wallace Cottrell Konecky filed the suit on behalf of Young on Jul. 1. Young claims he has incurred losses and, as such, felt compelled to file the lawsuit.

In the filing, the allegations are that SOL was a centralized cryptocurrency that the defendants benefitted from, at the cost of retail investors’ capital. None of the defendants has offered a statement in response to the lawsuit.

Regarding the alleged securities violations, the lawsuit said the token passes the Howey Test to determine if an asset is a security.

“Purchasers who bought SOL securities have invested money or given valuable services to a common enterprise, Solana. These purchasers have a reasonable expectation of profit based upon the efforts of the promoters, Solana Labs and the Solana Foundation, to build a blockchain network that will rival Bitcoin and Ethereum and become the accepted framework for transactions on the blockchain,” the filing claimed.

Solana ecosystem bearing up despite crash

The market crash has hurt many crypto companies and projects, but Solana does not seem to be struggling as much as its peers. The Solana NFT marketplace Magic Eden just secured more funding, acquiring $130 million in investments in a Series B round. And the blockchain also crossed $2 billion in all-time non-fungible token (NFT) sales recently.

The Solana Foundation and Solana Ventures also announced a $100 million fund to support Web3 startups in South Korea. These developments indicate that activity in the ecosystem is flourishing, though time will tell if it can meet the expectations.

It will be interesting to see how the lawsuit plays out. For the moment, the ecosystem appears to be doing well, with an eye on expanding its ecosystem as much as possible.