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Pump.fun Sued for Unregistered Securities and Risky Meme Coin Trading

Coin WorldFriday, Jan 31, 2025 3:40 am ET

1min read

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

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 that Pump.fun promoted and sold unregistered securities through its platform.

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, highlighting the platform’s alleged violation of federal law.

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 the complaint notes that the platform functions as a “joint issuer” in the creation, distribution, and ongoing operations of these coins.

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, making 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, pointing to significant gaps in user protection.

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, then sell off their holdings at inflated prices, leaving later investors with significant losses.

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