A lawsuit filed against Solana claims that the cryptocurrency is an unregistered security under the Howey test.

The Lawsuit Against Solana

A class-action lawsuit filed by a Californian resident on 1 July in the US District Court for the Northern District of California claims that Solana (SOL) is an unregistered security under the Howey test. The defendants in the lawsuit Solana Labs Inc., the Solana Foundation, Multicoin Capital Management LLC, Kyle Samani, Solana Labs CEO Anatoly Yakovenko and Falconx LLC are being sued by lead plaintiff Mark Young, an SOL investor.

The filing states that the defendants profited through SOL securities sales to US retail investors and did so in violation of the registration provisions of federal and state securities laws. The plaintiff accused the defendants of deliberately making false or misleading statements about Solana’s decentralized nature and total circulating supply.

The plaintiff has also stated that Kyle Samani and Multicoin Capital Management promoted SOL securities after purchasing them in 2019 and then used OTC trading desk Falconx to sell SOL securities worth millions of dollars to retail investors. The lawsuit filings also state that circumstances relating to SOL support the conclusion that the cryptocurrency is a security under the Howey test.

The recent crypto market crash has made some investors believe that the bottom is in and it might be time to buy Solana.

Young believes that the defendants’ SOL sales violated securities laws, and he seeks compensation for damages sustained because of the wrongful actions the defendants committed.

SEC Lawsuit Against Ripple

Solana isn’t the only cryptocurrency under attack for being an unregistered security as the US Securities and Exchange Commission (SEC) filed a lawsuit against Ripple Labs for selling cryptocurrency XRP, which it believes to be an unregistered security. The SEC filed the lawsuit on 22 December 2020 also against two Ripple Labs executives for selling XRP as a security without filing an SEC registration. Despite the lawsuit, some investors believe that now is the time to buy XRP.

Binance.US was also sued in June for claims that it sold Terra (LUNA) and TerraUSD (UST), believed to be unregistered securities. Coinbase was sued in March for allegedly selling numerous unregistered crypto securities.

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