A class action lawsuit has been filed against Solana Labs and its CEO Anatoly Yakovenko for allegedly breaking securities law. The implications for other similar cryptocurrencies could be huge, as exchanges are forced to delist them.
The lawsuit is being brought against defendants Solana Labs, CEO Yakovenko, the Solana Foundation, venture capital firm Multicoin Capital, its CEO Kyle Samani, and trading platform FalconX.
The lawsuit was filed by the plaintiff Mark Young, together with Roche Freedman LLP and Sneider Wallace Cottrell Konecky. The suit is on behalf of all Solana investors who bought the SOL token from March 24 2020, to the present time.
According to a Forbes article on the subject:
“Defendants made enormous profits through the sale of SOL securities to retail investors in the United States in violation of the registration provisions of federal and state securities laws, and the investors have suffered enormous losses,”
The lawsuit describes Solana as being a “highly centralised cryptocurrency” and stated that the defendants in the suit “determined who would receive SOL securities and under what conditions.”
One of the main defences employed by blockchain projects is their decentralised nature, but it could be imagined that Solana would have a hard time proving this given that it has been accused of being too centralised many times by detractors.
Implications for Solana and other similar projects could be disastrous for the crypto sector. Ripple is facing its own lawsuit battle with the SEC and its XRP token was delisted from Coinbase, Kraken, and other exchanges even before a verdict has been reached as to whether the token is a security or not.
Delistings and heavy fines could really take a heavy toll on crypto, and given that the sector is still deep in a bear market, any kind of rally and recovery could be negated, halting crypto in its tracks and sending it back down again, perhaps destroying some of these projects for ever.
Some might say that many of the crypto projects that are making fantastic innovations, especially in the world of finance, needed to start how they did in order to raise money for their development.
This will certainly cut no ice with the enforcement agencies, whose raison d’etre is to apply many decades old securities laws to these innovators.
However, it has to be acknowledged that the technology that many crypto projects are developing can cause immense change for good. Hestor Pierce’s safe harbour proposal may well have been what was needed in this impasse, but once again, enforcement agencies will probably get their way.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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