A class-action lawsuit has been lodged in New York federal court by Diego Aguilar against Pump.fun, a memecoin platform running on the Solana blockchain. It labels tokens on the social-trading site as unregistered securities. According to the plaintiff, Aguilar, he was subjected to big investment losses because of “pump-and-dump” schemes that brought in fees amounting to some $500 million.
Allegations Against Pump.fun
The suit alleges that Pump.fun allows users to create and trade volatile tokens without appropriate regulatory compliance. Aguilar points out that even simple checks like KYC and age verification are not performed, which has left the platform open to abuse and possible connections with illicit activity.
The lawsuit has UK-based Baton Corporation as its operator, which was co-founded by Noah Tweedale, Alon Cohen and Dylan Kerler. The suit seeks to rescind all token purchases by investors, financial compensation for affected investors occasioned by said alleged misconduct and recovery of costs incurred in litigating this action.
Background of the Lawsuit
The lawsuit comes after warnings by Burwick Law of legal action against Pump.fun for investor losses related to rug pulls and deceptive marketing practices. Burwick Law has previously come down on Pump.fun for allowing the sale of unregistered securities and hosting inappropriate content.
Interestingly, Burwick Law dropped a memecoin, “DOGSHIT2“, in October of 2024, to show the creation of a token. The coin has since gained traction and attracted criticism since most see this to be a double standard in the face of the law by the firm.
Market Reaction and Implications
According to data from Dune Analytics, trading on Pump.fun boomed amid legal issues as $3.3 billion was exchanged in a week. This is mainly due to the power of celebrity-linked meme coin releases. But now, that all changes with the lawsuit and some very important questions it raises regarding the future of the memecoin market and potential regulatory scrutiny.
Such nascent proliferation of new tokens has caught the attention of regulators and investors alike. The outcome is likely to set precedents that will be of importance to memecoins in their functioning and future compliance.
This only goes to prove that memecoin markets are having a rather tough time. Increased interest in unregistered securities may spur creators and investors into action in the right direction, toward compliance, given the assessment of risk involved in trading extremely volatile crypto assets.
