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Pump.Fun Lawsuit Explained: What It Means for Your Coins

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Lorena Nessi
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Key Takeaways

  • The Pump.Fun lawsuit focuses on allegations of unregistered securities, pump-and-dump schemes, and inadequate user protections. 
  • Peanut the Squirrel (PNUT), a memecoin tied to the lawsuit, experienced rapid price fluctuations, leading to significant investor losses. 
  • Increased regulatory scrutiny could reshape how memecoin platforms operate in the future. 
  • Diversifying portfolios and conducting thorough research can help investors navigate the risks associated with memecoins.

The cryptocurrency market is exploding, with new players and complexities emerging rapidly. 

This rapid growth is attracting projects, companies, and investors, as well as legal scrutiny—the recent case of Pump.Fun, a platform for creating and trading memecoins on the Solana blockchain, is a prime example of the legal battles brewing in the crypto world.

A class-action lawsuit  was filed against Pump.Fun. The complaint specifically names the sale of the memecoin Peanut the Squirrel (PNUT) as unlawful.

This article will examine the Pump.Fun lawsuit, analyzing its implications for the cryptocurrency space. We will explore how this case sets legal precedents, examine similar situations, and unpack the potential consequences for everyday crypto users.

Background of Pump.Fun

Pump.Fun is a platform built on the Solana ecosystem that facilitates the rapid creation of memecoins. It boasts a user-friendly interface and minimal technical requirements and incentivizes user participation.To encourage it, Pump.Fun also employs gamification elements, ensuring users remain engaged while building and promoting their memecoins.

Their supporters argue that part of Pump.Fun’s importance to the crypto ecosystem lies in simplifying the process of creating coins that contribute to the memecoin culture and niche projects. This user-friendly approach lowers the barrier to entry, potentially leading to increased activity on the Solana blockchain. 

Details of the Pump.Fun Lawsuit

On January 15, 2025, Burwick Law announced on X that it would pursue legal action against Pump.Fun on behalf of investors who incurred losses from its memecoins. The firm stated that individuals who lost money on Pump.Fun tokens might be entitled to compensation.

Burwick stated that Pump.fun ‘has collected hundreds of millions of dollars in fees while illicit drug use, self-harm, racism, antisemitism, lewd acts, bestiality, violent and other antisocial acts were displayed on the platform.’

The accusation led to a class-action lawsuit  filed in the U.S. District Court for the Southern District of New York on January 16, 2025. The case, brought by plaintiff Kendall Carnahan, names Baton Corporation Ltd. (doing business as Pump.Fun) and its founders, Alon Cohen, Dylan Kerler, and Noah Bernhard Hugo Tweedale, defendants.

The lawsuit alleges that Pump.Fun collaborated with influencers to co-issue and market unregistered securities. It also claims that the platform’s operations represent a new iteration of Ponzi and pump-and-dump schemes, with specific examples outlined in the case as evidence.

The key issue of the lawsuit is the sale of Peanut the Squirrel (PNUT), a memecoin that quickly hit a market cap of over $140 million in less than 24 hours. This rapid surge was followed by a significant price drop, resulting in losses for many investors.

What the Pump.Fun Lawsuit Means for Your Coins

The Pump.Fun lawsuit can potentially disrupt the memecoin market by increasing platform operational challenges and discouraging investor participation. A successful lawsuit could set a legal precedent, leading to stricter regulations for memecoin platforms and reshaping their operations.

However, it is still too early to predict the lawsuit’s outcome and broader impact on the memecoin market. As a relatively new and unregulated space, the memecoin market might remain resilient, with the lawsuit serving more as a cautionary tale than a turning point.

Meanwhile, in Dec. 2024, Pump.fun started blocking UK users from accessing the platform after receiving a regulatory warning  from the Financial Conduct Authority.

UK Pump.fun restrictions since Dec. 2024 | Source: Pump.fun
UK Pump.fun restrictions since Dec. 2024 | Source: Pump.fun

Pump.fun legal case underscores the legal risks of investing in memecoins. Investors must recognize that these assets often operate in legally gray areas, which can increase the likelihood of financial and regulatory complications. It is essential to research these risks thoroughly and understand them before investing in any memecoin.

Possible Outcomes and Effects

The Pump.Fun lawsuit could have several implications for the memecoin market:

  • Increased regulation of memecoin platforms: A successful lawsuit may lead to stricter regulations for memecoin platforms, making it harder for them to operate. This could discourage new projects and reduce investor participation in the market.
  • Decreased investor confidence: Legal actions like this can erode trust in memecoins, potentially causing price declines and making it harder for projects to attract funding. Investors may view the market as riskier, further dampening demand.
  • Increased scrutiny of memecoin projects: The case may prompt regulators and investors to scrutinize memecoin projects more closely. This added oversight could slow the launch and growth of new initiatives in the space.

While it is too early to predict the lawsuit’s outcome, it highlights the legal risks associated with investing in memecoins. Investors must remain cautious and fully understand the potential risks before participating in this volatile and largely unregulated market.

Legal Precedents and Similar Cases

In 2024, the cryptocurrency industry faced several legal challenges, reflecting growing regulatory scrutiny:

  • SEC vs. Coinbase: Filed in June 2023, this case remained a major focus in 2024. The SEC accused Coinbase of offering unregistered securities, highlighting the lack of clear rules for crypto exchanges and the evolving legal landscape for digital assets.
  • NYAG vs. Gemini, Genesis, and DCG: In January 2024, the New York Attorney General sued these companies, alleging they concealed significant losses to defraud investors. The case raised concerns about transparency and accountability in the crypto lending market, highlighting risks associated with certain platforms.
  • NYAG vs. Celsius: Also filed in January 2024, this lawsuit targeted the former CEO of Celsius. The allegations of defrauding investors and hiding the company’s financial troubles emphasized the need for responsible leadership and accurate disclosures in the crypto industry.

These cases highlight an increasingly strict regulatory environment, with authorities holding platforms accountable for compliance and seeking to address risks in the cryptocurrency market.

What Actions Could Crypto Holders Take

The Pump.Fun lawsuit highlights the need for caution and strategic planning, especially for those invested in memecoins or similar platforms. Here’s how investors can protect themselves:

  • Set stop-loss orders: Use automated tools to limit potential losses during price swings.
  • Verify compliance: Research the legal standing of platforms and tokens before investing further.
  • Spread investments: Allocate funds across established cryptocurrencies like Bitcoin, Ether, and stablecoins.
  • Stay informed: Monitor updates on the lawsuit and regulatory developments to make timely decisions.
  • Conduct thorough research: Do not just rely on the platform’s information or online hype. Look for independent reviews, assess the project’s development team and roadmap, and understand the token’s utility within the platform’s ecosystem.

Conclusion

The Pump.Fun lawsuit highlights the growing regulatory challenges facing the cryptocurrency market, particularly the memecoin sector. Legal actions like this highlight the risks of investing in projects that may not fully comply with regulatory standards. 

The lawsuit could lead to stricter platform rules, increased scrutiny of new projects, and a shift in market sentiment.

Investors must remain cautious, reassess high-risk holdings, and diversify their portfolios to reduce exposure to potential losses. Understanding the legal standing of platforms and staying informed about developments in the crypto space are essential steps for protecting investments.

The Pump.Fun case serves as a reminder of the importance of due diligence and risk management in a rapidly changing market. While the lawsuit’s outcome remains uncertain, it is a pivotal moment that could shape the future of memecoins and cryptocurrency regulation.

FAQs

Could the Pump.Fun lawsuit lead to new laws for the crypto market?

The lawsuit could inspire policymakers to draft specific laws targeting memecoin platforms and similar projects. This might result in clearer rules for compliance and stricter oversight of token creation and trading.

What is the potential timeline for resolving the Pump.Fun lawsuit?

Legal cases like this can take months or even years to resolve, especially if appeals are involved. Investors should prepare for prolonged uncertainty regarding the platform and its tokens.

Are other memecoin platforms facing similar legal risks?

While Pump.Fun is the focus of this case. Other memecoin platforms with similar operations could face legal challenges if they are found to violate securities laws or enable manipulative practices.

What role do influencers play in the allegations against Pump.Fun?

The lawsuit claims that influencers were involved in co-issuing and marketing tokens, which allegedly misled investors and contributed to the platform’s legal troubles.





Disclaimer: The information provided in this article is for informational purposes only. It is not intended to be, nor should it be construed as, financial advice. We do not make any warranties regarding the completeness, reliability, or accuracy of this information. All investments involve risk, and past performance does not guarantee future results. We recommend consulting a financial advisor before making any investment decisions.
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Lorena Nessi

Lorena Nessi is an award-winning journalist and media and technology expert. She is based in Oxfordshire, UK, and holds a PhD in Communication, Sociology, and Digital Cultures, as well as a Master’s degree in Globalization, Identity, and Technology. Lorena has lectured at prestigious institutions, including Fairleigh Dickinson University, Nottingham Trent University, and the University of Oxford. Her journalism career includes working for the BBC in London and producing television content in Mexico and Japan. She has published extensively on digital cultures, social media, technology, and capitalism. Lorena is interested in exploring how digital innovation impacts cultural and social dynamics and has a keen interest in blockchain technology. In her free time, Lorena enjoys science fiction books and films, board games, and thrilling adventures that get her heart racing. A perfect day for her includes a spa session and a good family meal.
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