Cryptocurrency platform Pump.Fun was hit with a class action lawsuit on Thursday. The company and its top leadership are accused of exposing investors to high financial risk and luring nearly $500 million in fees by marketing and issuing unregistered and volatile meme coins, breaching US securities protocols.
Pump.Fun, which Baton Corporation operates, is accused of relying on “a novel evolution in Ponzi and pump and dump schemes,” according to Diego Aguilar, a plaintiff in the case.
The complaint was filed in the US District Court for the Southern District of New York. The suit is going after Pump.Fun meme coins.
The lawsuit raises cryptocurrency’s most lingering question (when is a token considered a security?). The plaintiff is arguing that all tokens under Pump.Fun are securities; therefore, it must be consistent with US security laws.
Pump.Fun is offering automated tools for creating digital tokens
Diego Aguilar took action after losing money trading meme coins (FWOG, FRED, and GRIFFAIN) created on Pump.Fun, despite the platform itself not being responsible for their creation.
He is challenging the company for allegedly “orchestrating this scheme” by offering automated tools that enable anyone to create and sell nearly worthless digital tokens within minutes. As a result, he argues that Pump.Fun qualifies as a “joint issuer” of all tokens launched on its platform.
Aguilar is suing Baton Corp. alongside three of the company’s founders, COO Alon Cohen, CTO Dylan Kerler and CEO Noah Tweedale. None of the founders has responded to the suit.
The lawsuit emerged just two weeks after Pump.Fun was sued for selling unregistered securities. Both cases were filed by the New York-based law firm Wolf Popper LLP but are led by different plaintiffs.
While the suits share similarities, the first specifically targets certain meme coins on the Pump.Fun platform. The January 16 lawsuit alleges that the PNUT token, a Solana-based meme coin inspired by Peanut the Squirrel, is an unregistered security, yet Baton and its three founders continue to sell it.
Wolf Popper LLP is also working with Burwick Law, which offers crypto litigation services in a class action lawsuit targeting Hawk token promoters, a meme coin inspired by Hailey Welch, aka Hawk Tuah.
The SEC may soon change tack on crypto regulations
With Donald Trump as president, the legal landscape of cryptocurrencies is already changing. The US SEC has established a task force to develop a comprehensive and clear regulatory framework for crypto assets.
Crypto advocate Commissioner Hester Peirce leads the task force. Peirce is heading a team that is working with the crypto society to develop better regulations.
The team will also offer technical assistance to Congress as it develops crypto policies. The task force points out that there will be a significant shift in how crypto will be regulated under President Trump.
Most crypto players have held that the former SEC chair was not accommodative to crypto development and would also deal with the industry ruthlessly. Several crypto platforms have suffered legal consequences, with some founders, including CZ, serving jail terms.
While campaigning, President Trump gave hope to the crypto community, and he is fulfilling his promises regarding cryptocurrency. The environment may change, and some cases may even be dropped.
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