What You Need to Know:
- Pump.fun, a memecoin creator, is facing a class action lawsuit for violating securities laws.
- The lawsuit claims that all tokens made via Pump.fun’s platform are classified as securities.
- This firm is also behind two previous lawsuits against Pump.fun concerning the PNUT and HAWK tokens.
On Thursday, the memecoin generator Pump.fun was accused in a proposed class action lawsuit of collecting nearly $500 million in fees while allegedly violating U.S. securities laws.
The case, filed in the Southern District of New York, raises critical questions surrounding when a token qualifies as a security. The lawsuit argues that each token created on Pump.fun’s platform should be considered a security, thus falling under U.S. regulations. However, this is still a contested issue in law. With the recent shift in crypto regulation under the administration of Donald Trump, the U.S. Securities and Exchange Commission (SEC) is forming a new task force aimed at creating a comprehensive regulatory framework for the sector.
The lead plaintiff, Diego Aguilar, claims losses from trading three memecoins — FWOG, FRED, and GRIFFAIN. Although Pump.fun does not create the tokens directly, the filing alleges that the platform enables users to quickly create and trade tokens of negligible value, thereby qualifying as a ‘joint issuer’ of these tokens.
The lawsuit mentions Baton Corporation, a U.K.-registered entity posited as the operator of Pump.fun, alongside co-founders Alon Cohen, Dylan Kerler, and Noah Tweedale, the latter of whom communicated a refusal to comment on the matter. The other co-founders remain unavailable for comment as of now.
Wolf Popper LLP, the law firm behind this suit, also initiated a previous class action against Pump.fun about two weeks ago, centered on the unregistered sale of the PNUT token, which once boasted a $1 billion market cap.
Additionally, the same firm is linked to another lawsuit regarding the HAWK token, associated with influencer Hailey Welch (known as Hawk Tuah).
Even though Pump.fun launched just one year ago, it has not been without controversy. The U.K. financial regulator issued a warning against the platform last March, prompting Pump.fun to bar users from the U.K. The platform also faced backlash for a now-discontinued livestream feature that allowed harmful or inappropriate content during promotional events.
This lawsuit seeks financial damages and attorney fees.
