Pump.fun Hit with Class Action Lawsuit Over Solana Meme Coins

On January 30, a class action lawsuit was filed in the Southern District of New York, accusing the operators of Pump.fun of violating US securities laws.

The lawsuit, filed by lead plaintiff Diego Aguilar, alleges Pump.fun promoted and sold unregistered securities. 

Pump.fun Sued for Facilitating Risky Meme Coin Transactions

The lawsuit targets UK-based Baton Corporation Ltd, which it claims operates Pump.fun, and its co-founders. According to the complaint, they offered tokens without proper registration with the US Securities and Exchange Commission (SEC).

“The Tokens are, and were, securities as defined by the Securities Act,” the legal filing stated.

For context, Pump.fun is a platform that makes it easy for anyone to launch a meme coin on Solana. It lowers technical and financial barriers for users. Though not directly involved in the creation of meme coins, the complaint notes that Pump.fun functions as a “joint issuer.”

The lawsuit argues that Pump.fun is “exercising comprehensive control over their creation, distribution, and ongoing operations.” This apparently makes it a “joint issuer.”

Diego Aguilar, the lead plaintiff, claims he lost money trading three specific meme coins created on Pump.fun — FWOG, FRED, and GRIFFAIN. Through this case, Aguilar and other affected investors seek redress for their financial losses. 

The lawsuit also highlights Pump.fun’s role in creating a speculative and manipulative trading environment. The platform uses gamified features to encourage the trading of highly volatile and risky meme coins.

The complaint argues that these features make it easier for users, sometimes even minors, to create and trade tokens without the protections typically required in securities transactions.

“Pump.Fun minimized or omitted crucial investor protections, such as: Know Your Customer (KYC) verification; Anti-Money Laundering (AML) compliance; age verification requirements; and risk disclosures trading limits or other protective mechanisms,” the lawsuit said.

Moreover, the suit claims that Pump.fun’s operations are tied to a range of fraudulent practices, including “pump and dump” schemes. In these schemes, insiders artificially inflate the price of tokens through coordinated promotional efforts. They then sell off the holdings at inflated prices, leaving later investors with significant losses.

“I’m hoping this leads to only safe meme coins being launched and less risk of being rugged,” said one user on X.

Nevertheless, Pump.fun has also faced similar lawsuits before. Burwick Law recently sued Pump.fun on behalf of investors who lost money on failed meme coins and other questionable projects.