Pump.fun Faces Class Action Lawsuit Over Unregistered Securities and High Fees

Overview of the Lawsuit

A class action lawsuit was filed against Baton Corporation, the operator of Pump.fun, in the Southern District of New York. The plaintiff, Diego Aguilar, accuses the platform of selling "highly-volatile" unregistered securities and earning approximately $500 million in fees, in violation of U.S. securities laws.

Allegations Against Pump.fun

The lawsuit claims that all tokens created on Pump.fun qualify as securities under U.S. law and should be subject to federal regulations. Pump.fun and its founders—Alon Cohen, Dylan Kerler, and Noah Tweedale—are accused of co-issuing and marketing these unregistered securities. The plaintiff alleges that the platform operates similarly to Ponzi and pump-and-dump schemes, targeting younger, less experienced investors through social media campaigns that exploit the "fear of missing out" (FOMO).

Plaintiff's Claims and Losses

Aguilar claims to have suffered losses after investing in three memecoins—FRED, FWOG, and GRIFFAIN—created on Pump.fun. These tokens were reportedly marketed with promises of "exponential" returns. The lawsuit asserts that Pump.fun failed to implement essential investor protections, such as know-your-customer (KYC) and anti-money laundering (AML) protocols, enabling fraudulent activities.

Ongoing Legal Challenges

This is not the first legal action against Pump.fun. The platform, which allows users to launch memecoins on the Solana network, is already facing two other class action lawsuits related to the PNUT and HAWK tokens. Law firms Wolf Popper LLP and Burwick Law are involved in these cases, with Burwick Law recently reaching out to Pump.fun users who have incurred losses, encouraging them to join the litigation.

Financial Performance Amid Litigation

Despite the ongoing legal battles, Pump.fun continues to generate significant revenue. In January, the platform reported earning $116.72 million in fees, according to data from The Block’s dashboard. This highlights the platform's profitability even as it faces scrutiny over its business practices.

The lawsuit underscores growing concerns about regulatory compliance in the cryptocurrency and decentralized finance (DeFi) spaces, particularly regarding the issuance and marketing of digital assets.