Solana, the dubbed Ethereum-killer, is about to face one of its biggest challenges yet. Only this time, the opposing force is not from the cryptocurrency market.
Solana Labs Figures Itself in a Class Action Lawsuit à la Ripple (XRP)
A group of people filed a class-action lawsuit against Solana Labs before the California federal court recently. According to the case, Solano labs and the people within the ecosystem made illegal revenue by promoting their own token, which is not registered under the US securities and exchange commission.
According to a Forbes report, the lawsuit could create a lasting impact on the future of the whole cryptocurrency industry. Many expect this will not be good news because cryptocurrency has always criticized government institutions and other financial experts for the longest time.
Many believe that if the case results in SOL token being considered a security, it could reverberate towards the whole market. According to the report, we can expect that its outcome could further endanger the view of regulatory agencies towards crypto, which has been viewed negatively by many for the longest time. Moreover, it is also expected to open up a floodgate of changes that could be felt in many cryptocurrency exchanges, such as Binance, Coinbase, Kraken, and more, that are listing similarly-natured cryptocurrencies.
If the ruling on the case goes against the favor of SOL, the likelihood of the token being delisted on many exchanges is high. The same assumption can hold water for other cryptocurrency tokens in the market today. The report from Forbes harkened back to the dark past of Ripple and its native token, the XRP, where they also faced a regulatory challenge before the SEC for selling $1.3 billion tokens to the public. The same argument against SOL today was the same stance taken against XRP - that they were selling unregistered securities.
What Does the Lawsuit Against Solana (SOL) Say?
The lawsuit against Solana was filed by Mark Young, Roche Freedman LLP, and Schneider Wallace Cottrell Konecky. They said they were representing investors who were allegedly lied to drive up SOL token sales from March 24, 2020, to the present. According to the plaintiffs, SOL earned a lot of profit from the sale without telling retail investors that they were buying unregistered securities.
The defendants stated in the lawsuit include Solana Labs, a for-profit organization backing the Solana ecosystem, and its chief executive officer, Anatoly Yakovenko. Included as well are organizations related to Solana, such as the Solana Foundation, crypto venture capital firm Multicoin Capital along with its chief executive office Kyle Samani, and a trading platform by the name of FalconX.
The lawsuit against Solana claims that they were violating the federal and state securities law by not putting the token on registration as a 'security.' Another point stressed in the lawsuit is that Solana caused its investors enormous losses, which must be charged to the plaintiff as one of their liabilities to their investors.
However, beyond the Forbes report and the lawsuit, it has to be noted that the cryptocurrency market and the top tech stocks globally have been on a tumultuous season in the investment area for the past few weeks. Several problems have caused the bloodbath that many crypto tokens are experiencing today, including SOL.
Moreover, above many crypto tokens in the space, SOL created huge profits for most of its investors last year. As many may remember, SOL was one of the fastest-growing tokens in the space, which even recorded an all-time high of around $260 in November 2021. It also attracted investment from one of the richest men in crypto, Sam Bankman-Fried. SOL performed well in recent years despite the outages it experienced over the last few months.
But over and above the mentioned considerations for Solana, according to Young, the project was a highly centralized cryptocurrency. Moreover, Young alleged that there were a lot of insiders within the Solana ecosystem who stood to benefit significantly at the expense of the investors who were unaware of the real picture.
Related Article: Solana Outage Now Solved After 'Durable Nonce' Bug Hits Blockchain | Here's What Happened
