Pump.fun Faces Class Action Over Alleged Securities Law Breaches

Pump.fun, a Solana meme coin platform, is being sued for allegedly violating securities laws. Investors claim the platform facilitated the sale of unregistered securities, leading to significant financial losses.

Alleged Securities Violations

The lawsuit, filed at the end of January, claims that every single token created on Pump.fun is essentially an unregistered security. This is a big deal because securities are subject to strict regulations in the US. The plaintiffs argue that Pump.fun has raked in nearly half a billion dollars in fees from these tokens. The lead plaintiff, Diego Aguilar, says he personally lost money trading meme coins like FWOG, FRED, and GRIFFAIN that were launched on the platform. The source indicated that these tokens were heavily promoted using meme culture, with promises of crazy high returns. One coin, FWOG, was even touted as reaching a $500 million market cap before its value plummeted.

The core argument is that Pump.fun isn’t just a platform; it’s actively involved in creating and marketing these tokens alongside influencers. The lawsuit describes this as “a novel evolution in Ponzi and pump-and-dump schemes.” Even though Pump.fun doesn’t directly create the tokens, the suit claims that by providing automated tools for their launch they are a “joint issuer”. The lawsuit names Baton Corporation (allegedly the operator) and three of its co-founders: Alon Cohen, Dylan Kerler, and Noah Tweedale as defendants. The plaintiffs are seeking to get their money back from the token purchases plus damages and legal costs.

Past Criticism and Controversy

This isn’t the first time Pump.fun has been in legal trouble; just a couple of weeks prior, another class-action lawsuit was filed by Burwick Law on behalf of investor Kendall Carnahan. That suit also accuses Baton Corporation of selling unregistered securities focusing on a specific meme coin called PNUT that hit a $1 billion market cap at one point. Max Burwick, the firm’s founder, has publicly criticized these platforms calling them “the ultimate evolution of multi-level marketing scams.” According to him, they prey on people’s desperation. The source revealed that Burwick Law formally announced its legal campaign against the company claiming investors were victims of meme coin rug pulls and misleading promises.

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Adding to its woes, Pump.fun introduced a livestream feature back in November 2024 to boost user engagement. However, users quickly abused it by broadcasting disturbing content. This resulted in a major public backlash and ultimately forced Pump.fun to shut down the feature, leading to a drop in revenue as explained by the source. It’s clear Pump.fun is facing some serious challenges and these legal battles could have big implications for the platform and the broader meme coin space.

Source: Pump Fun Faces Class Action Over Alleged Securities Law Breaches | Cryptopotato.com

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