Pump.fun Crypto Faces Major Lawsuit Over Alleged Memecoin Fraud

31-01-2025 By: Avni Patel
Pump.fun Crypto Face

Pump.fun Crypto Lawsuit Raises Questions About Memecoin Regulation

Pump.fun Hit with Lawsuit Alleging Memecoins Are Unregistered Securities

Memecoin platform Pump.fun faces legal action over alleged violations of U.S. securities laws. A proposed class-action lawsuit filed on January 30, 2025, in a New York federal court accuses the Solana-based platform of launching “unregistered security memecoins” that generated nearly $500 million in fees.

Lawsuit Details and Claims

The lead plaintiff, Diego Aguilar, claims to have lost money trading tokens like FWOG, FRED, and GRIFFAIN, all created on Pump.fun. The lawsuit alleges that Pump.fun, operated by the UK-based Baton Corporation, acted as a joint issuer, controlling the technical infrastructure, liquidity, pricing, and promotion of these tokens. The case accuses the platform of using aggressive marketing tactics to create artificial urgency and volatility, leading to significant financial losses for retail investors.

The suit further criticizes the platform for operating like a “Ponzi” or “pump-and-dump” scheme, wherein tokens are heavily marketed, causing temporary price surges followed by rapid declines. Along with Baton Corporation, the complaint also names its co-founders: Alon Cohen, Dylan Kerler, and Noah Bernhard Hugo Tweedale.

The Debate on Memecoins and Securities Classification

The case has raised important questions about the regulatory status of memecoins. According to legal experts, there is an ongoing debate about whether memecoins like those on Pump.fun qualify as securities. Some argue that they are exempt from securities regulations under the 1987 Securities Exchange Act amendment. A similar issue arose in 2019 when the SEC lost a case involving Dogecoin derivatives, suggesting a complex path ahead for regulators.

Impact on Investors and Market Sentiments

The lawsuit is part of a broader trend of growing concerns about investor protection in the rapidly expanding memecoin space. Despite the legal challenges, Pump.fun has seen massive growth, with an all-time high of $3.3 billion in weekly trading volume. In January 2025 alone, the platform generated $116.72 million in revenue, surpassing both Solana and Ethereum.

Investors, however, have faced significant risks. The platform has been accused of facilitating “rug pulls” and other fraudulent activities that resulted in substantial losses. Legal actions filed by firms like Burwick Law and Wolf Pepper LLP highlight ongoing issues with memecoin scams and unfulfilled promises.

Past Legal Troubles and Future Outlook

This isn’t the first lawsuit Pump.fun has faced. The company has been previously targeted for its role in the collapse of the PNUT token, which reached a $1 billion market cap before dropping nearly 89%. Despite these controversies, Pump.fun’s market capitalization remains high, with memecoins on the platform collectively valued at over $5.8 billion.

As regulatory bodies and investors continue to grapple with the legal status of memecoins, Pump.fun’s future could hinge on the outcome of this high-profile case.

Also read: City Holder Daily Combo and Daily Quiz February 01, 2025
WHAT'S YOUR OPINION?
Related News
Related Blogs