Shalini Nagarajan

<div id="highlights-block_62c6c20347ab6" class="highlights">
 <ul>
 <li>“Defendants made enormous profits through the sale of SOL securities to retail investors,” the plaintiff alleged</li>
 <li>The lawsuit paints SOL as a highly centralized cryptocurrency that has benefited company insiders</li>
 </ul>
 
</div>



A Solana investor has filed a class action <a href="https://storage.courtlistener.com/recap/gov.uscourts.cand.397697/gov.uscourts.cand.397697.1.0.pdf" target="_blank" rel="noreferrer noopener">lawsuit</a> against key parties in the Solana ecosystem for allegedly making misleading statements and profiting from selling unregistered securities to retail customers.



The plaintiff, Mark Young, filed the suit on July 1 against Solana Labs, Solana Foundation, Solana CEO <a href="https://cms.blockworks.co/tag/anatoly-yakovenko/" target="_blank" rel="noreferrer noopener">Anatoly Yakovenko</a>, crypto investment firm <a href="https://cms.blockworks.co/tag/multicoin-capital/" target="_blank" rel="noreferrer noopener">Multicoin Capital</a> and its co-founder Kyle Samani, as well as trading platform <a href="https://cms.blockworks.co/tag/falconx/" target="_blank" rel="noreferrer noopener">FalconX</a>.&nbsp;



“Defendants made enormous profits through the sale of solana (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,” Young, who said he bought SOL tokens in 2021, wrote. 



The lawsuit was filed on behalf of investors who purchased Solana tokens between March 24, 2020 and the filing date, he said.



Solana Labs and FalconX declined to comment. Multicoin Capital didn’t return Blockworks’ request for comment. Yakovenko and Samani could not be reached. 



Court documents show Young has alleged the defendants spent exorbitant sums to promote SOL in the US since April 2020, which supposedly boosted its price to $258 per token and market value to $77 billion as of Nov. 5, 2021.



“These promotional efforts took SOL securities from a relatively obscure crypto-asset to one of the top crypto-assets in the world,” Young wrote.



“Samani and Multicoin continuously flogged SOL securities, inflating its market price from below a dollar to hundreds of dollars, persisting in their promotional efforts even after it was clear that Solana had serious outages and technical issues,” he added, referring to multiple snafus over the past year, including an outage in September 2021 that <a href="https://cms.blockworks.co/solana-recovers-after-10-hour-outage/" target="_blank" rel="noreferrer noopener">lasted more than 10 hours</a>.



The plaintiff also said the defendants made misleading statements regarding the supply and the decentralized nature of SOL and claimed company insiders held a substantial percentage of tokens.



“As of May 2021, insiders held 48% of the SOL supply. The network is thus highly centralized,” Young claimed.



He alleged Yakovenko raised private funding in multiple rounds by selling SOL securities at low prices. And in one such “seed sale,” Solana sold “the future rights” to nearly 80 million SOL tokens for $3.17 million ($0.04 per token) in April 2018, the filing claims. It adds that the defendants chose to sell only a small percentage of its token supply (less than 2%) in its 2020 initial coin offering, which priced SOL tokens at $0.22, according to <a href="https://cryptorank.io/ico/solana" target="_blank" rel="noreferrer noopener">CryptoRank</a>.



“Defendants did this to ensure they had de facto control over the Solana blockchain and to artificially drive down the available supply of SOL securities through coordination amongst themselves,” the plaintiff wrote.



Young also said Multicoin profited from offloading millions of SOL tokens onto retail investors, while using over-the-counter (OTC) trading desks such as FalconX as a broker.



Solana’s SOL is down 78% so far this year and has fallen 12% in the last month to $36.85, data from <a href="https://www.blockworksresearch.com/assets/sol/" target="_blank" rel="noreferrer noopener">Blockworks Research</a> shows. The token&#8217;s losses in June were spurred by blockchain <a href="https://cms.blockworks.co/solana-price-dips-after-another-network-outage/" target="_blank" rel="noreferrer noopener">downtime</a> that prevented transactions from being validated for over four hours.



Young’s case, filed in the Northern District of California, is represented by law firms Roche Freedman and Schneider Wallace.&nbsp;



Roche Freedman has filed numerous lawsuits against other cryptocurrency firms in the last year, including crypto exchanges <a href="https://www.prnewswire.com/news-releases/roche-freedman-llp-and-dontzin-nagy--fleissig-llp-bring-class-action-lawsuit-against-binance-us-for-engaging-in-unlawful-sales-of-ust-to-investors-301570669.html" target="_blank" rel="noreferrer noopener">Binance US</a> and <a href="https://www.prnewswire.com/news-releases/roche-freedman-llp-and-selendy--gay-pllc-allege-in-class-action-lawsuit-that-kucoin-illegally-made-eos-and-trx-available-for-trading-301427255.html" target="_blank" rel="noreferrer noopener">KuCoin</a>, alleging execution of illegal trades or violation of securities law in relation to tokens such as EOS, TRX and Terraform Labs&#8217; failed stablecoin UST.



In December, Roche Freedman also secured a <a href="https://cms.blockworks.co/verdict-in-craig-wright-civil-trial-100m-award-for-plaintiff-but-no-punitive-damages/" target="_blank" rel="noreferrer noopener">$100 million verdict</a> in a lawsuit against self-proclaimed Bitcoin creator Craig Wright.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

cryptocurrency

Solana Investor Sues Project Insiders, Claims Network Is ‘Highly Centralized’

Ben Strack

<div id="highlights-block_629f480d80866" class="highlights">
 <ul>
 <li>The Ball Multicoin Bitwise Metaverse Index’s top holdings include ether, chainlink, solana, filecoin and polygon</li>
 <li>Ball said he expects tens of trillions in value to be created and reallocated to support the metaverse in the coming decades</li>
 </ul>
 
</div>



Bitwise Asset Management has joined forces with Multicoin Capital and the managing partner of EpyllionCo to launch an index that offers exposure to cryptoassets central to the metaverse.



The Ball Multicoin Bitwise Metaverse Index is set to include up to 40 assets, the companies revealed Tuesday, and a fund tracking the index is now available to qualified purchasers for private placement subscription with a $100,000 minimum investment.



San Francisco-based Bitwise had more than $1.2 billion as of March 31. In 2017 it created what is now the world’s largest crypto index fund — <a href="https://bitwiseinvestments.com/crypto-funds/bitw" target="_blank" rel="noreferrer noopener">the Bitwise 10 Crypto Index Fund</a> — and expanded to other sectors, launching <a href="https://bitwiseinvestments.com/crypto-funds/defi" target="_blank" rel="noreferrer noopener">a DeFi fund</a> and an <a href="https://bitwiseinvestments.com/crypto-funds/nft" target="_blank" rel="noreferrer noopener">NFT-focused fund</a> last year.



The company has partnered with crypto investment firm Multicoin Capital and Matthew Ball, a venture capitalist and managing partner of EpyllionCo, which operates an early-stage venture fund. Ball co-founded the <a href="https://www.roundhillinvestments.com/etf/metv/" target="_blank" rel="noreferrer noopener">Roundhill Ball Metaverse ETF</a> (METV) that launched in June 2021 and has $539 million in assets.



“We really assembled a dream team of experts around this topic, and I’m excited by the index and fund that’s come out of it,” Bitwise Chief Investment Officer Matt Hougan told Blockworks.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“The metaverse is a big opportunity and, if it’s going to succeed, it’s going to be built to a significant degree on crypto and public blockchains. This strategy captures that opportunity set.”</blockquote>



The Ball Multicoin Bitwise Metaverse Index focuses on four sectors: interoperability, ledgers, DeFi (decentralized finance) and the enabling of communities. Top holdings are ether (ETH), chainlink (LINK), solana (SOL), filecoin (FIL) and polygon (MATIC). Others include the sandbox (SAND) and decentraland (MANA).



It screens for risks around liquidity, regulation and asset integrity, and adds discretionary overweights to increase exposure to assets that, in the view of the index’s governing committee, have high growth potential.



Ball said in a statement that he expects tens of trillions in value to be created and reallocated to support the metaverse in the coming decades. Multicoin Capital Managing Partner Kyle Samani called the metaverse “one of the most audacious and exciting ideas ever conceived.”



“However, in order for it to be vastly accessible, it must be built on an open, decentralized, credibly neutral foundation, which means it must be built in large part with crypto assets and public blockchains,&#8221; Samani said in a statement. &#8220;With literally thousands of crypto assets to choose from, underwriting the most investable opportunities is a never-ending challenge.”&nbsp;



Hougan noted during a panel at last month’s Permissionless event that while indexing within crypto remains “super tiny,” he expects the share of indexing in the space to rise from below 1% to 20% or 30% in the next 10 years.&nbsp;



He added that innovation within crypto indexing will likely come in the form of yield strategies, or indexes catering to investors targeting specific sectors.&nbsp;



“You’re going to see the same Cambrian explosion of indexing strategies that allow people to express themselves in crypto without picking individual tokens, which has just a huge amount of idiosyncratic risk…that I think people will be increasingly less comfortable taking,” Hougan said.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

Kyle Samani

Newsletter

Blockworks Research