Solana NFT platform Metaplex faces legal warning over plan to seize unclaimed SOL

Source Cryptopolitan

Metaplex, an NFT platform built on Solana, faces legal threats after it announced an attempt to sweep SOL tokens that have not been claimed into its DAO treasury. Burwick Law, a legal firm specializing in cryptocurrency issues, released an open letter on April 22 protesting the action and demanding that it be reversed before April 25.

Recently, Metaplex launched a resize optimization for Token Metadata (TM) NFTs that allows the holders to get a small refund of SOL by April 25. The optimization arises from a technical change that shrinks the space the NFTs occupy in the Solana protocol. However, despite such adoption, over 54,000 SOLs worth more than $6.5M are believed to still be unclaimed, according to data found on Metaplex’s website.

The protocol previously explained that the remaining SOL will be sent to the DAO treasury once the deadline is up, but the direction for its utilization is uncertain. These possibilities range from airdrops, grants, or other form of community contribution. However, this lack of user control has raised concerns within the public domain.

“Unjust enrichment” claims could follow, lawyers say

According to Burwick Law, Metaplex’s broad strategy is legally risky and might result in unjust enrichment and legal action under consumer protection laws. In an open letter published on April 22, the firm stated that many NFT holders were never properly informed of the resizing procedure or the risks of failing to meet the deadline.

“Many minters never received clear notice that these lamports could be swept, let alone diverted to a treasury they do not control,” Burwick stated. The firm noted that the platform decision erodes decentralization as it points to ‘‘Code is law’’ is only valid provided the code is understood and unchangeable. If a protocol can rewrite yesterday’s deal tomorrow, then the idea of decentralized perma­nence is more like an empty sound.”

Burwick recommends refund with DAO bounty

Burwick additionally urged Metaplex to halt its execution and provide direct refunds to current holders of NFTs. It included a 90/10 plan where 90% of the remaining SOL unclaimed would be redistributed to users while 10% would be set aside to pay for the running of the DAO.

The law firm framed the compromise as a middle ground protecting user rights, ensuring DAO funding, and averting legal disputes. Burwick reports that other DeFi projects have taken similar measures to address refunds on rents without seeking legal action.

“The ball is in the DAO’s court,” Burwick wrote. “Let’s show the world that Web3 corrects its own course and lives up to its founding principles of transparency, immutability, and fair dealing.”

The letter also reflects the discontent of many NFT collectors, including Burwick, who feel that the organization could be a medium for misusing the funds raised.  

Burwick has several cases of representing clients who invested in tokens but whose tokens were mismanaged. Further, its current legal action filed against the LIBRA token team for alleged insider trading is its way of standing firm in investor protection within the digital asset market. As reported by Cryptopolitan, the law firm claimed that Kelsier, KIP, Meteora, and others conspired to conduct an unfair token issuance of LIBRA.

In February, Burwick sent a cease and desist letter to Pump.fun stating that the latter is using their logos and names of the tokens by offering them on the platform. The letter called for the “immediate removal” of tokens such as Dog Shit Going No Where (DOGSHIT2) because the firms claimed that they were being “impersonated” by the tokens through the illicit use of intellectual property.

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