Memecoin Launchpad Pump.fun Sued Over Investor Losses, Business Practices; Solana Mentioned

Pump.fun, the popular memecoin Launchpad, has been sued by cryptocurrency law firm Burwick Law and securities law firm Wolf Popper LLP, in a federal class action lawsuit on behalf of crypto investors whose hopes were allegedly "exploited" by the platform.

Aside from allegedly collecting hundreds of millions in fees from customers that included minors, Pump.fun was accused of displaying "racist, anti-Semitic, torture, and sexual content on its homepage."

$PNUT in Crosshairs

Peanut the Squirrel (PNUT), a token that took the crypto space by storm during the heat of the 2024 U.S. elections, has been dragged into the lawsuit that named Pump.fun and its creators as defendants.

The lawsuit stated.that PNUT is a security under securities laws but no registration documents were ever filed with the U.S. Securities and Exchange Commission (SEC) to make the memecoin eligible for sale.

Pump.fun is a Ponzi?

The lawsuit went straight to the point, accusing the memecoin factory's operations as "a novel evolution in Ponzi and pump and dump schemes."

The platform alleged to have "extracted nearly half a billion dollars in fees" from investors by offering highly-volatile and unregistered securities, but its "guerilla marketing" tactics were all allegedly running around a business that promoted child abuse, racism, self-harm, potentially minor p***ography, anti-Semitism, and violence.

Pump.fun was also accused of omitting the basic investor protections required of every provider, which includes Know-Your-Customer (KYC) systems and anti-money laundering protocols. The platform also allegedly did not have the proper risk disclosures or other protective mechanisms to limit investors' losses.

Solana Blockchain Mentioned in Scathing Lawsuit

Outside Pump.fun's operations, the lawsuit also mentioned the popular Solana blockchain, which has paved the way for many memecoins to thrive.

According to the legal complaint, the "effects of the Defendants' unlawful conduct were felt in this District by investors who transacted in memecoins through Solana's New York-based blockchain network."

Notably, the lawsuit stated that a substantial portion of the conduct and transactions that constituted securities laws violations occurred "through the Defendans' use of the Solana blockchain network."

The PNUT token, which plunged nearly 40% in the last 30 days, is a Solana-based memecoin.

Damning Images Included in Lawsuit Exhibit

In documents accompanying the lawsuit, the plaintiffs attached images to reveal that there was inappropriate activity on the platform, including the alleged brandishing of firearms by a "serial livestreamer on Pump.fun known from multiple pump & dump schemes."

Pump and dump is a phrase used widely in the crypto space to describe token activity wherein a memecoin developer or team promotes the token aggressively to artificially boost a token's price. Once prices are up, they sell their holdings in large batches, leaving smaller investors with significant losses as the coin's price plunges.

"We are proud to represent crypto investors and enthusiasts in seeking accountability and advocating for the responsible advancement of blockchain technology," the law firm said in a statement Thursday.

Burwick Law also tagged Donald Trump-appointed crypto and AI czar David Sacks, New York Attorney General Tish James, and former Florida Attorney General Pam Bondi "to raise awareness about the broader issues facing crypto investors nationwide."

Pump.fun has yet to release an official statement regarding the lawsuit.

Originally published on IBTimes