Solana-Based Pump.fun Faces Legal Battles Over Alleged Securities Violations
By: Eva Baxter
Pump.fun, a Solana-centric token launch platform, finds itself embroiled in legal turmoil as a federal class action lawsuit accuses the platform of orchestrating a $500 million scheme involving the issuance and promotion of unregistered securities. As outlined by the recent court filing, this legal battle unfolds in the U.S. District Court for the Southern District of New York, spearheaded by Diego Aguilar, a former user of Pump.fun. Aguilar, represented by Burwick Law, cites the company's excessive marketing strategies and lack of regulatory compliance in his allegations against Baton Corporation Limited, the creators of Pump.fun.
The lawsuit depicts a landscape where Pump.fun allegedly transformed into a hub for unregistered securities sales, amassing profits through the utilization of influencer partnerships to bolster speculative interest in its tokens. Notably, Aguilar claims losses from investments in tokens such as FRED, FWOG, and GRIFFAIN, which were aggressively promoted to create a facade of legitimacy. The entity behind Pump.fun, accompanied by its founders Alon Cohen, Dylan Kerler, and Noah Bernhard Hugo Tweedale, stands accused of devising what is described as an evolution of Ponzi and pump-and-dump schemes.
Central to the allegations are claims that Pump.fun designed a standardized token infrastructure across its platform. The incorporation of a proprietary bonding curve mechanism purportedly governed token pricing based on consumer demand. Such features, Aguilar contends, enforced a speculative nature upon each token, thus designating them as unregistered securities under U.S. federal law. Moreover, accused of bypassing fundamental investor safeguards such as Know Your Customer (KYC) checks and anti-money laundering protocols, Pump.fun allegedly opened the floodgates for minors to engage in speculative trading without regulatory oversight. Alarmingly, the lawsuit also accuses the platform of facilitating the launch of tokens promoting antisemitism, racism, and explicit content.
Encapsulating the depth of the alleged malfeasance, the lawsuit emphasizes how Pump.fun reportedly marketed FRED with exceptional artwork and expansive promotional efforts, securing high-profile exchange listings and a robust social media presence. Simultaneously, FWOG was positioned as a rival to other successful memecoins, with its trading volume exaggerated through social media hype. Concurrently, GRIFFAIN was marketed as an AI-driven trading initiative, purportedly featuring misleading claims of automated profit generation. Rooted in intertwined marketing efforts and exchange partnerships, each token's valuation hinged largely on Pump.fun's promotional strategies and community interaction, qualifying them as securities under the Howey Test.
This legal action is the third of its kind aimed at Pump.fun in recent months, previously facing litigious challenges for its involvement in launching PNUT and HAWK tokens. As Aguilar and his legal team pursue damages and heightened regulatory inspection of Pump.fun's operational model, the case propels into the spotlight broader dialogues regarding the accountability of token launch platforms in endorsing speculative investments.
