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A crypto investor has brought a class action lawsuit against Pump.Funa platform to launch and invest in meme-inspired cryptocurrencies, after suffering trading losses.
Representing the plaintiffs are Wolf Popper and Burwick Law, the two companies that deal with a separate class action brought by investors in December on a memecoin launched by web personality Haliey Welch, better known as the Hawk Tuah girl, who collapsed in value shortly after trading began. (Welch was not named as a defendant in that suit).
“These ’emperor’s new clothes’ crypto schemes cannot continue to masquerade as legitimate finance, leaving the vulnerable in the dark,” says Max Burwick, founding partner of Burwick Law.
Pump.Fun was a success when it launched in January 2024, giving people a way to launch memecoins – highly volatile cryptocurrencies that usually have no inherent purpose beyond speculation – instantly and at no cost. The new lawsuit, filed Thursday in the Southern District of New York, alleges that Pump.Fun operated as an issuer and dealer of unregistered securities. By making marketing claims that downplay the likelihood of losing money trading memecoins, the complaint says the platform also puts investors at high financial risk.
Separately, the lawsuit claims that these memecoin platforms, such as Pump.Fun, are designed in a way that incentivizes pump-and-dump activity. “Early investors or insiders artificially inflate token prices through coordinated buying and promotional campaigns, then sell their holdings at peak prices, causing the value of the token to collapse and leaving subsequent investors with substantial losses,” the complaint says.
The complaint points to the circumstances surrounding the launch of a particular Pump.Fun memecoin—PNUT, which refers to the famous squirrel euthanized last year in New York—to substantiate its claims.
Pump.Fun did not immediately respond to a request for comment. But in an interview with WIRED last year, Noah Tweedale, one of the three co-founders of Pump.Fun named in the suit, refuted the idea that the platform can benefit from regular investors who lose money. “The idea with Pump was to build something where everyone was on the same playing field,” Tweedale said. “I want to stress, we don’t want people to lose money on our platform. There is no benefit in any way.”
More than 6 million unique memecoins were launched through Pump.Fun, the the most successful of which they are valued at hundreds of millions of dollars. The memecoin market is now worth more than $100 billion in aggregate, market data shows
In its first 12 months in operation, Pump.Fun is reported by third parties to have generated more than $ 350 million in revenue, take a cut of 1 percent of the trade. The platform is on pace to make more than $1 billion in revenue by 2025.
In any case, the process carried out by the crypto-investor that follows the reports of unethical trading activities, criticism regarding content moderation, and a warning issued against Pump.Fun by the UK financial regulator—could threaten to put a dampener on runaway growth.
The lawsuit is based on the idea that memecoins should in some circumstances be classified as securities, a particular type of investment instrument. The complaint alleges that by failing to register the sale of tokens with the Securities and Exchange Commission (SEC), the relevant US financial regulator, Pump.Fun allegedly violated securities laws and denied investors disclosure required by regulated entities.
