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The well-known Solana-oriented Launchpad Pump.fun is facing scrutiny once more as a law firm has lodged a class action lawsuit against the platform on behalf of investors who suffered financial losses due to memecoins issued through Pump.fun. The lawsuit contends that the platform purportedly sells unregistered securities, endorses pump-and-dump schemes, and lacks adequate user protection mechanisms.
Class Action Lawsuit Filed Against Solana’s Pump.Fun
In the previous year, Pump.fun established itself as the leading token launcher following its significant success, which was both inspired by and contributed to the current memecoin frenzy. However, it garnered attention again when Burwick Law commenced legal proceedings against the platform.
On Wednesday, the legal firm declared on X that it was “pursuing legal action on behalf of investors in pumpdotfun memecoins” after spending months “collaborating with everyday individuals who have lost considerable amounts of money to memecoins, rugs, and unfulfilled promises.”
Burwick Law announces legal proceedings against Pump.fun, Source: Burwick Law on X
The Solana-driven platform made its debut on January 19, 2024, and quickly became a market sensation for facilitating the creation and launch of memecoins. Its immense success propelled the platform past Ethereum and most Solana protocols in fees and revenues during Q3 2024, culminating in a record $15 million daily revenue on January 1, 2025.
Nevertheless, the year for Pump.fun has been fraught with controversy, as users have frequently criticized the platform for allegedly permitting detrimental practices and “destroying” the memecoin market. The law firm emphasized the launchpad’s latest controversies, stating:
“In recent months, pumpdotfun has amassed hundreds of millions of dollars in fees while displaying illicit drug use, self-harm, racism, antisemitism, lewd behavior, bestiality, violence, and other anti-social activities on the platform. The creator of this platform has opted to remain anonymous, despite acknowledging the necessity of transparency in scaling and engaging retail users, which raises significant concerns regarding accountability.
According to a report by Bitcoinist, the Solana-based platform faced backlash in November due to its livestream debacle. Various Pump.fun users broadcasted harmful and violent material via the platform’s livestream feature to gain popularity and elevate their tokens.
The “trend” appears to have originated when a 12-year-old trader launched a memecoin and attempted to execute a rug-pull during a Pump.fun livestream. Consequently, users initiated numerous memecoins leveraging controversial prompts to enhance their token values.
Ultimately, the platform recognized the issue and axed the livestreaming feature indefinitely “to guarantee the absolute safety” of users.
A ‘New Development in Ponzi and Pump-And-Dump Schemes’?
The legal firm has submitted a class action complaint against Baton Corporation Ltd, a UK-based entity, along with the three founders of the platform, Alon Cohen, Dylan Kerler, and Noah Bernhard Huge Tweedale.
The complaint, lodged in the Southern District of New York on Thursday, alleges that Pump.fun has been providing and vending unregistered securities. The lawsuit claims that Peanut the Squirrel (PNUT) constitutes an unregistered security, thereby making its sale a breach of the Securities Act.
Class Action Complaint. Source: Cdn
Importantly, the sole plaintiff, Kendall Carnahan, states he lost only $231 from acquiring the Solana memecoin but aims to represent other affected individuals.
Additionally, the lawsuit contends that the operations of Pump.fun represent a “new evolution in Ponzi and pump and dump schemes,” which permits minors to interact with unregistered securities.
Beyond Pump.Fun’s innovative marketing approaches, the platform allows minors to issue and acquire unregistered securities.
The plaintiff also asserts that the Solana platform failed to implement fundamental investor protection protocols, such as Know-Your-Client measures and anti-money laundering processes, and neglected to inform users of inherent risks.
“This is illustrated by the straightforwardness with which anyone, regardless of age, can create an account and purchase a token in under 5 minutes,” the legal document states.
The developments have drawn a varied reaction from the cryptocurrency community. Some users of Pump.fun indicated their intention to join the lawsuit, whereas others within the community remarked that it wasn’t “realistic to anticipate anything” from it.
Solana (SOL) is trading at $221 on the one-week chart. Source: SOLUSDT on TradingView
Featured Image from Unsplash.com, Chart from TradingView.com
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