Solana’s Pump.Fun Sued: Class Action Alleges Pump-and-Dump Schemes and Inadequate User Protection

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Once more, Pump.fun, a well-known Launchpad operating on Solana, finds itself embroiled in controversy. A legal firm has initiated a class action lawsuit against the platform on behalf of investors who suffered losses from memecoins issued through Pump.fun. The suit contends that the platform may be dealing with unregistered securities, endorsing pump-and-dump tactics, and failing to provide adequate safeguards for users.

Solana’s Pump.Fun Hit With Class Action Lawsuit

Over the past year, Pump.fun has become the foremost token launcher due to its tremendous success, which in turn ignited and was fed by this cycle’s memecoin craze. Yet, it gained more attention recently when Burwick Law filed a lawsuit against the platform.

On Wednesday, the law firm declared on their platform that they are taking up legal cases for investors who had been involved with the pumpdotfun meme coins. This decision comes after several months of collaboration with ordinary people who have suffered substantial financial losses due to investments in meme coins, rugs (abandoned projects), and unmet promises.

On January 19, 2024, the Solana-based platform debuted, quickly capturing market attention due to its user-friendly approach for minting and distributing meme tokens. The platform’s popularity soared in Q3 2024, outperforming Ethereum and most Solana protocols in terms of fees and earnings, generating a staggering $15 million daily revenue on January 1, 2025.

Regardless, Pump.fun’s year has stirred debate too, with users frequently accusing the platform of tolerating harmful actions and negatively impacting the memecoin market. A legal firm recently acknowledged the turmoil surrounding the launchpad, citing its recent controversy.

Over the past several months, the platform Pumpdotfun has amassed hundreds of millions of dollars in fees. During this time, it has been a venue for numerous disturbing acts such as drug abuse, self-harm, racism, antisemitism, lewd behavior, bestiality, and violent actions that are considered antisocial. The person behind the creation of this platform has chosen to stay hidden from public view, despite recognizing the need for transparency in expanding user base and business operations. This anonymity raises significant questions about responsibility and accountability.

According to reports from Bitcoinist, the Solana platform faced criticism in November due to issues with its livestream service. Some users of Pump.fun exploited the livestream function to spread harmful and violent content, which gained traction and boosted the value of their tokens.

It appears that the phenomenon took off following an incident where a 12-year-old trader introduced a memecoin and attempted to manipulate investors by rug-pulling them during a live stream on Pump.fun. Consequently, users responded by creating numerous memecoins using provocative triggers in an attempt to inflate the value of their tokens.

In the end, they admitted the issue and permanently disabled the live streaming function for the sake of complete user safety.

A ‘Novel Evolution In Ponzi And Pump-And-Dump Schemes’?

A law firm has initiated a class action lawsuit against Baton Corporation Limited, a company based in the United Kingdom, as well as the three individuals who founded the platform – Alon Cohen, Dylan Kerler, and Noah Bernhard Huge Tweedale.

A complaint lodged in the Southern District of New York on Thursday asserts that Pump.fun has been illegally offering and trading unregistered securities. The lawsuit contends that Peanut the Squirrel (PNUT) falls under this category, which means its sale infringes upon the Securities Act.

Specifically, Kendall Carnahan, the sole plaintiff, alleges that he suffered a loss of $231 when buying the Solana memecoin. However, he intends to file the lawsuit on behalf of other users who may have also been impacted in similar ways.

Furthermore, the court case asserts that Pump.fun’s activities represent an innovative development within Ponzi and pump-and-dump scams, enabling minors to interact with unregistered securities inappropriately, potentially involving them.

Beyond Pump.Fun’s distinctive promotional strategies, the platform also allows minors to both create and buy unregistered securities without registration.

Additionally, the plaintiff argues that the Solana platform neglected to implement essential safeguards for investors, such as identity verification processes (Know-Your-Customer) and anti-money laundering regulations, and did not provide adequate warnings about potential risks to its users.

According to the document, it’s clearly demonstrated that anyone, regardless of their age, can swiftly set up an account and buy a token within just a few minutes.

 

The news elicited a varied reaction within the cryptocurrency circle. While some users of Pump.fun expressed their intention to participate in the legal action, others within the community voiced skepticism, suggesting that achieving results from the lawsuit might not be feasible.

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2025-01-18 07:12