Solana, a cryptocurrency recently dubbed the Ethereum killer, used in NFT technology and for creating decentralised apps (dapps), has been hit by a lawsuit. The lawsuit is a class-action-based one. It means the company has been accused of using malpractices in business and not thinking about its investors or corporate social responsibility.
The case was filed on July 1 in a court in California, America. Mark Young has accused Solana of not being a decentralised company. The company’s insiders held more than 48% of the total supply as of May 2021. The company has made misleading statements about its native token SOL.
The company has also failed to burn the amount disclosed to the investors. They only burned 3.3 million Sol and sent approximately 11.3 million Sol to a market maker in April 2020. The company spent large sums of money to promote Solana so that SOL’s private holders would sell and gain an absurd profit when the price surged.
Many people have also come from Solana’s side to support it. One of the supporters is Kule Sumani, the CEO of Multicoin Capital, a private VC firm.
The bear case for Solana is concentrated around two arguments:
1) Solana is currently not decentralized and may never decentralize enough in the future
2) Despite its progress, the Solana ecosystem is very immature and faces a steep uphill battle vs Ethereum
— Daniel Cheung (@HighCoinviction) August 16, 2021
More insights into the Solana case
It is implied that Solana has all the characteristics of a centralised company. It has also sold securities. This move was dependent on a single factor, being whether Solana could create a network or not. It did make a network, and the defendants in the case personally profited.
If Solana loses the case, there is a chance it will be delisted from significant crypto exchanges like Ripple (XRP). Ripple was found guilty in an SEC lawsuit, and many exchanges like Kraken and Coinbase delisted it.
