Solana Labs Files Reply in Support of Motion to Dismiss Crypto Lawsuit

News | July 4, 2024 By:

On Thursday, June 20, 2024, Solana Labs filed a reply in support of its motion to dismiss the amended class action complaint in the United States District Court for the Northern District of California.

The lawsuit, Young v. Solana Labs, involves a dispute over purchases of Solana tokens, known as SOL. Mark Young has brought a class action against Solana Labs, alleging that the company violated securities laws by soliciting purchases of SOL tokens without properly registering them.

In its initial motion to dismiss, Solana Labs argued that Young failed to adequately claim that Solana Labs solicited his purchase of SOL tokens. Solana Labs filed a reply to Young’s opposition brief, reasserting its arguments that the complaint should be dismissed.

Solana Labs disputed Young’s reliance on a recent case, SEC v. Coinbase, which addressed whether transactions involving certain digital tokens were securities transactions under the Howey test. However, Solana Labs noted that Coinbase did not involve a claim under Section 12 of the Securities Act, which is the basis for Young’s solicitation theory.

Additionally, Solana Labs argued that Young has failed to sufficiently allege three necessary elements for a solicitation claim under Section 12. First, Young did not adequately plead that Solana Labs made any statements that could be considered soliciting purchases of SOL tokens. While Young pointed to tweets from a Twitter account associated with Solana, Solana Labs claimed it was not shown to control that account.

Second, Young did not allege that any alleged solicitations by Solana Labs were successful in causing his purchase of SOL tokens. Solana Labs argued there needs to be a causal connection between the solicitation and purchase. Third, Young did not plead that Solana Labs financially benefited from his particular purchase, which is required for solicitation liability.

Solana Labs also reiterated arguments that Young failed to show he purchased SOL tokens in a public offering or a domestic transaction, as required for a Section 12 claim.

A hearing on the motion to dismiss is scheduled for August 6, 2024, before U.S. District Judge Rita Lin.

Please contact BlockTribune for access to a copy of this filing.