According to a new class-action lawsuit, the Howey test shows that Solana (SOL) is actually a security. The plaintiff claims that the circumstances and facts that relate to SOL indicate that it is a security in accordance with the Howey test and is not a cryptocurrency.

New lawsuit

On July 1st, a new lawsuit was filed against Solana (SOL) in the Northern District of California, which has alleged that it is actually unregistered security and not a cryptocurrency at all. California resident Mark Young is the lead plaintiff and also a Solana investor. He has filed a lawsuit in the US District Court on behalf of himself, along with others who have bought SOL tokens since March 24th, 2020.

The Solana Foundation, Multicoin Capital Management LLC, Solana Labs Inc., Falconx LLC, Antaloy Yakovenko, the chief executive of Solana Labs, and Kyle Samani are the defendants that have been named in the lawsuit. According to the lawsuit, these defendants sold SOL securities to retail investors in the US in order to make enormous profits. It said that the sale violates the registration requirements of the state and federal securities laws and investors have had to suffer huge losses.

The allegations

The lawsuit asserted that misleading and false statements had been made by the defendants regarding the total circulating supply of the Solana tokens, along with its decentralized nature. It also highlighted problems with the Solana network, which include network congestion as well as devastating power outages.

The plaintiff asserted that Kyle Samani and Multicoin Capital Management had bought SOL securities back in 2019 for $0.4 and had promoted them relentlessly. He further said that they had then used OTC trading desks for offloading SOL securities worth millions of dollars. One such broker they used for making these sales was Falconx.

Currently, Solana’s market cap makes it the ninth-largest crypto and reached an all-time high last year in November at $260.07. The lawsuit said that according to the guidelines provided by the Securities and Exchange Commission (SEC), Solana is security.

Compensation

The plaintiff has asked to be compensated for the damages that the Solana investors had to suffer because of the wrongdoings of the defendants. Plus, they have also demanded that Solana be declared security and that the unregistered sales of the SOL tokens were in violation of the law.

A lawsuit had been filed against the Binance.us exchange in the previous month, which claimed that crypto terra (LUNA) and the UST stablecoin that collapsed recently were both unregistered securities. Likewise, a lawsuit had also been filed against Coinbase back in March for selling 79 securities that were unregistered. The list also included Solana.

Gary Gensler, the chairman of the SEC, has repeatedly said that there are a lot of tokens in the market that are not actually cryptocurrencies, but actually securities. Meanwhile, Ripple Labs has been sued by the SEC on the same topic, as it refers to the XRP token as a security and not a cryptocurrency.