Pump.fun, a popular Solana-based memecoin launchpad, is facing a class-action lawsuit. The lawsuit claims the platform engaged in illegal activities and failed to protect its users.
The Lawsuit: Pump-and-Dump and Unregistered Securities
A law firm, Burwick Law, filed the lawsuit on behalf of investors who lost money on memecoins launched through Pump.fun. The lawsuit alleges that:
- Pump-and-dump schemes: Pump.fun facilitated illegal pump-and-dump schemes, artificially inflating memecoin prices before a coordinated sell-off.
- Unregistered securities:
The platform sold unregistered securities, violating securities laws. The memecoin Peanut the Squirrel (PNUT) is specifically cited as an example. - Inadequate user protection: Pump.fun lacked essential safeguards, such as Know Your Customer (KYC) procedures and anti-money laundering (AML) protocols. The lawsuit highlights the ease with which anyone, including minors, could create accounts and trade.
Pump.fun’s Rise and Fall (Sort Of)
Pump.fun quickly became a major player in the Solana ecosystem, even surpassing Ethereum and other Solana protocols in revenue during part of 2024. At its peak, it reportedly processed $15 million in daily revenue.
However, this success was overshadowed by controversy. Users repeatedly criticized the platform for:
- Harmful content: The platform allegedly allowed users to broadcast harmful and violent content, including instances of illicit drug use, racism, and other offensive material, during livestreams.
- Minors participating: The lawsuit highlights the involvement of minors in both creating and trading memecoins on the platform.
- Lack of accountability: The anonymous nature of the platform’s creators raised concerns about accountability.
The livestream feature was eventually shut down after a 12-year-old user attempted a rug pull during a live broadcast.
The Plaintiff and the Future
The lawsuit, filed in New York, names Baton Corporation Ltd and Pump.fun’s three founders as defendants. While the main plaintiff only lost $231, the lawsuit aims to represent other affected users. The complaint describes Pump.fun’s operations as a “novel evolution in Ponzi and pump-and-dump schemes.”
The crypto community’s reaction to the news was mixed, with some users expressing support for the lawsuit and others expressing skepticism about its outcome.
