Nikolas Sargeant
The legal challenges facing memecoin generator platform Pump.fun continue to mount as a second class-action lawsuit emerges, alleging serious violations of U.S. securities laws. The latest legal action claims the platform has been operating as an unregistered securities marketplace under the guise of creating meme tokens, potentially marking a turning point in the regulation of cryptocurrency meme platforms.
Platform Accused of Orchestrating $500M Memecoin Scheme
According to court documents filed Thursday in the U.S. District Court for the Southern District of New York, Pump.fun has allegedly accumulated nearly $500 million in fees through the marketing of highly volatile, unregistered memecoins. The lawsuit, filed by plaintiff Diego Aguilar against UK-registered Baton Corporation and its co-founders, represents the first legal action to challenge the entire ecosystem of memecoins on the Pump.fun platform.
The lawsuit's core allegation states that "Pump.Fun's core function is to work alongside influencers to co-issue and market unregistered securities," describing the operation as "a novel evolution in Ponzi and pump and dump schemes." The platform's automated tools, which enable rapid token creation and distribution, are characterized as mechanisms facilitating the sale of "nearly worthless digital Tokens in minutes."
FWOG and Other Tokens at Center of Controversy
The plaintiff's experience with several platform-generated tokens, particularly FWOG, FRED, and GRIFFAIN, highlights the volatile nature of these investments. The case specifically points to FWOG, a Solana-based token, which experienced a dramatic 1,850% price increase before plummeting 51.20% from its all-time high. Despite the significant drop, FWOG maintained a market capitalization of $90.78 million, demonstrating the substantial scale of these memecoin operations.
The lawsuit also emphasizes the platform's alleged regulatory deficiencies, noting the absence of crucial investor protections including Know Your Customer (KYC) procedures, Anti-Money Laundering (AML) protocols, and appropriate risk disclosures. These omissions, according to the filing, further underscore the platform's alleged disregard for securities regulations.
Earlier PNUT Token Lawsuit Compounds Legal Troubles
This latest legal challenge follows a January 16 lawsuit filed by Burwick Law on behalf of Kendall Carnahan, focusing on the platform's involvement with the Peanut the Squirrel (PNUT) token. The PNUT case, which centers on a Solana blockchain memecoin that reportedly achieved a $1 billion market capitalization, represents another significant legal threat to the platform's operations.
Max Burwick, founder and partner of the law firm behind the initial lawsuit, has taken a strong stance against platforms like Pump.fun, characterizing their operations as "multi-level marketing scams, preying on human desperation and the digital attention economy." His criticism extends to the broader impact of such platforms on the cryptocurrency ecosystem, stating that "Memecoins and platforms like Pump.fun have nothing to do with advancing crypto's capabilities – they are a perverse distortion of its promise."
These concurrent lawsuits represent a significant legal challenge to the memecoin generation platform and could potentially reshape the regulatory landscape for similar services in the cryptocurrency space. The outcomes of these cases may establish important precedents for how memecoin platforms operate within the boundaries of U.S. securities laws.
