According to a class-action lawsuit, the cryptocurrency solana (SOL) violates the Howey test because it is not registered as a security. The plaintiff claimed that “the particular facts and circumstances relating to SOL securities support the conclusion that SOL is a security under the Howey test.”
Solana Is a Security, According to a Lawsuit
The cryptocurrency Solana (SOL), according to a lawsuit filed on July 1 in the U.S. District Court for the Northern District of California, is an unregistered security. Mark Young, a California resident and SOL investor, is the lead plaintiff in the case. He is suing on behalf of all investors who bought solana tokens starting on March 24, 2020.
Solana Labs Inc., the Solana Foundation, Solana Labs CEO Anatoly Yakovenko, Multicoin Capital Management LLC, Kyle Samani, and Falconx LLC are the defendants in the lawsuit. The complaint claims:
In violation of the federal and state securities laws’ registration requirements, defendants sold SOL securities to retail investors in the United States, making enormous profits while the investors suffered immeasurable losses.
According to the lawsuit, the defendants knowingly and willfully misrepresented the total circulating supply of solana and its decentralized structure. It continues by mentioning the “devastating outages” and network congestion that can occur on Solana’s blockchain network.
After purchasing SOL securities for $0.40 in 2019, the plaintiff claimed that Multicoin Capital Management and Kyle Samani “relentlessly promoted SOL securities.” He went on to explain that they then “offloaded millions of dollars of SOL securities on retail investors” by using OTC trading desks like Falconx to serve as a broker for the sale.
According to market capitalization, SOL is currently the ninth-largest cryptocurrency. Solana is currently trading at $36.83, down 7.0% over the past 30 days, as of the time of writing. A record high for SOL was $260.07 in November of last year, according to information from Bitcoin.com Markets.
The lawsuit asserts the following, citing the release of a “Framework for ‘Investment Contract’ Analysis of Digital Assets” by the U.S. Securities and Exchange Commission (SEC) on April 3, 2019:
The particular facts and circumstances pertaining to SOL securities support the finding that SOL satisfies the Howey test for securities.
The plaintiff demands payment for all losses incurred as a result of the defendants’ misconduct as well as a ruling that solana is a security and that the defendants’ unregistered sales of SOL securities were illegal under the relevant laws.
A lawsuit was filed against Binance.us last month alleging that the cryptocurrency terra (LUNA) and the algorithmic stablecoin terrausd (UST) are both unregistered securities. For allegedly selling 79 unregistered cryptocurrency securities, including SOL, Coinbase was sued in March.
Gary Gensler, chairman of the SEC, has stated numerous times that many tokens are unregistered securities. The SEC considers XRP to be an unregistered security, so it is still suing Ripple Labs and its executives in this regard.
