Solana-based meme coin platform Pump.fun has been hit with a class-action lawsuit accusing it of violating U.S. securities laws.
Alleged Violations and Investor Losses
The suit, filed on January 30, alleges that every token created through Pump.fun is an unregistered security, from which the platform has profited nearly $500 million. Lead plaintiff Diego Aguilar claims he faced financial losses trading three specific Pump.fun-created meme coins: FWOG, FRED, and GRIFFAIN. These tokens were aggressively marketed using meme culture and promises of exponential returns, attracting investors but ultimately leading to significant financial losses. FWOG, for instance, was promoted as having a $500 million market cap before its value dropped.
Criticism and Controversy
This is not the first time the platform has faced legal action. Just two weeks earlier, on January 16, Burwick Law filed a separate class-action suit on behalf of investor Kendall Carnahan. That case also accused Baton Corporation and its executives of selling unregistered securities, specifically targeting the PNUT token, which allegedly reached a $1 billion market cap. The firm’s founder, Max Burwick, has been vocal in his criticism of such sites, calling them "the ultimate evolution of multi-level marketing scams, preying on human desperation and the digital attention economy."
Future Implications and Company Response
Pump.fun also faced controversy following its November 2024 introduction of a livestream function to enhance user engagement. Some users quickly abused the feature to broadcast explicit and disturbing content. Following public backlash, the company was forced to shut down the livestream, leading to a marked drop in revenue.
The legal and reputational challenges facing Pump.fun could have serious implications for its future operations, highlighting the need for stricter regulations in the crypto market.
