Legal Troubles for Pump.fun
A federal class action lawsuit has been filed against Pump.fun, a Solana-based token launch platform, alleging violations of US securities laws. The lawsuit, filed by Diego Aguilar, accuses Pump.fun of orchestrating an extensive scheme to issue and promote unregistered securities, resulting in nearly $500 million in fees.
Allegations of Fraud
- Pump.fun is accused of functioning as a hub for unregistered securities sales, partnering with influencers to drive speculative interest in its tokens.
- The platform allegedly employed aggressive marketing tactics to create legitimacy while running what the lawsuit describes as Ponzi and pump-and-dump schemes.
- Standardized token infrastructure and a proprietary bonding curve mechanism were used to determine token pricing based on demand, leading to tokens with identical speculative characteristics.
- The lawsuit claims Pump.fun omitted basic investor protections like Know Your Customer verification and anti-money laundering protocols, enabling minors to invest in speculative assets without oversight.
Details of the Lawsuit
The lawsuit accuses Pump.fun of promoting tokens like FRED, FWOG, and GRIFFAIN through influencer campaigns and exchange listings. Each token’s value was heavily dependent on the platform’s marketing efforts, exchange listings, and community engagement, establishing them as securities under the Howey Test.
Previous Legal Troubles
This lawsuit is the third legal action against Pump.fun in recent months, with the company previously facing lawsuits over the launch of PNUT and HAWK tokens. The case raises concerns about the legality of token launchpads and their role in facilitating speculative investments.
Conclusion
Diego Aguilar and his legal team are seeking a jury trial to pursue damages and further regulatory scrutiny of Pump.fun’s business model. The outcome of this lawsuit could have significant implications for the future of token launch platforms and the regulation of the cryptocurrency industry.