Pump.fun, a popular memecoin generator, is at the center of a new class action lawsuit alleging violations of U.S. securities laws. The lawsuit claims that the company and its executives generated nearly $500 million in fees while offering unregistered securities.
Allegations of Securities Violations
Filed on January 30, 2025, in the Southern District of New York, the lawsuit targets Pump.fun and its operators, including Baton Corporation Ltd, Alon Cohen, Dylan Kerler, and Noah Bernhard Hugo Tweedale. Plaintiff Diego Aguilar alleges financial losses after purchasing tokens such as the Fwog token and Griffain (GRIFFAIN), which were aggressively marketed with promises of rapid returns and high profits.
Pump.fun’s “Ponzi-like” Structure
The lawsuit also concerns the sale of the Peanut the Squirrel Token and describes Pump.fun's operations as akin to a Ponzi scheme. It accuses the company of marketing unregistered securities through influencer-driven hype and urgency, leading retail investors to make rash purchases.
The SEC's Changing Approach to Crypto Regulation
The SEC is considering revising its regulatory stance on digital assets, including memecoins, as it traditionally hesitates to classify cryptocurrencies as securities. Under President Donald Trump's new administration, the SEC may take a more active role. A crucial point in this matter is the legal definition of memecoins, as the 1987 Securities Exchange Act amendment excludes them from being securities.
Pump.fun is facing increasing legal challenges and controversies, which may affect the future of crypto regulation and platform practices. Like other firms in the market, Pump.fun must focus on compliance with existing and potential new regulatory requirements.
