Pump.fun Sued Over Unregistered Meme Coins and Risky Trading Practices

Pump.fun Faces Class Action Lawsuit Over Allegations of Unregistered Securities and Risky Meme Coin Trading Practices

Pump.fun, a platform that simplifies the launch of meme coins on the Solana blockchain, is facing a class action lawsuit alleging it facilitated the sale of unregistered securities in the high-risk meme coin market. The lawsuit targets Baton Corporation Ltd, the UK-based entity behind Pump.fun, and its co-founders, accusing them of marketing and selling tokens without adhering to necessary registration protocols required by the US Securities and Exchange Commission (SEC).

The complaint contends that the tokens offered on the platform are securities as defined by the Securities Act, and that Pump.fun's role in the creation, distribution, and ongoing operations of these coins qualifies it as a "joint issuer." Lead plaintiff Diego Aguilar claims that his investments in three meme coins—FWOG, FRED, and GRIFFAIN—have resulted in significant financial losses, and he and other impacted investors aim to secure compensation for their losses through this lawsuit.

The lawsuit also addresses the manipulative trading environment fostered by Pump.fun's gamified features, which can entice even inexperienced users—sometimes minors—into speculative trading without the safeguards present in more traditional investment platforms. The complaint highlights the absence of 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 points to practices commonly associated with financial fraud, particularly "pump and dump" schemes, where insiders artificially inflate token prices via coordinated promotions, ultimately cashing out their assets at the expense of latecomers. The class action suit against Pump.fun resonates with broader industry concerns regarding the safety and regulation of cryptocurrency investments, as the market evolves, the demand for stringent oversight is paramount to safeguarding investors' interests.

The outcome of this lawsuit could set a significant precedent for future cryptocurrency operations and the legal responsibilities of platforms that facilitate the trading of digital assets. Investor vigilance and regulatory action will be crucial in tackling the pitfalls associated with meme coin trading.