A crypto investor has brought a class action lawsuit against Pump.Fun, a platform for launching and investing in meme-inspired cryptocurrencies, after suffering trading losses.
Representing the plaintiffs are Wolf Popper and Burwick Law, the two firms handling a separate class action brought by investors in December over a memecoin launched by web personality Haliey Welch, better known as the Hawk Tuah girl, which collapsed in value soon after trading began. (Welch was not named as a defendant in that suit.)
“These ‘emperor’s new clothes’ crypto schemes can’t keep masquerading as legitimate finance, leaving the vulnerable in the lurch,” says Max Burwick, founding partner at Burwick Law.
Pump.Fun was a hit when launched in January 2024, giving people a way to launch memecoins—highly volatile cryptocurrencies that typically 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 has operated as an unregistered securities issuer and seller. In making marketing claims that downplay the likelihood of losing money trading memecoins, the complaint alleges, the platform also put investors at heightened financial risk.
Separately, the lawsuit alleges that these memecoin platforms, like Pump.Fun, are designed in such a way as to incentivize 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 token’s value to collapse and leaving later investors with substantial losses,” the complaint claims.
The complaint points to the circumstances around the launch of a particular Pump.Fun memecoin—PNUT, which references the celebrity squirrel euthanized last year in New York—to evidence 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 Pump.Fun cofounders named in the suit, refuted the idea that the platform stands to benefit from regular investors losing 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. It doesn’t benefit us by any means.”
More than 6 million unique memecoins have been launched through Pump.Fun, the most successful of which are valued at hundreds of millions of dollars. The memecoin market is now worth in excess of $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, taking a 1 percent cut of trades. The platform is on pace to make more than $1 billion in revenue in 2025.
However, the lawsuit brought by the crypto investor—which follows reports of unethical trading activity, criticism relating to content moderation, and a warning issued against Pump.Fun by the UK financial regulator—could threaten to put a dampener on the runaway growth.
The lawsuit hinges on the idea that memecoins should in some circumstances be classified as securities, a particular type of investment instrument. The complaint claims that by failing to register token sales with the Securities and Exchange Commission (SEC), the relevant US financial regulator, Pump.Fun allegedly violated securities laws and denied investors the disclosures required of regulated entities.
Whether cryptocurrencies should be classified as securities is a long-running debate that has spawned a mess of litigation between the SEC and cryptocurrency companies. Though the SEC has not pursued many memecoin-related cases to date, in the lawsuit against Pump.Fun, the crypto investor alleges that all memecoins issued through the platform resemble securities by virtue of the way they are marketed.
“This largely turns on the question of an expectation of returns through marketing promises,” says Burwick. “The issue with almost every memecoin is: How was this marketed?” Essentially, if a creator or issuing platform suggests that a coin is headed to the moon, Burwick believes it is a security.
In the interview with WIRED, Tweedale rejected the idea that memecoins might fall under the purview of the SEC. “Memecoins being securities is a joke. That can’t be the case,” he said.
Elsewhere, the lawsuit alleges that Pump.Fun essentially gamified the trading experience and engaged in a “sophisticated marketing campaign” that combined “promises of exponential returns, luxury lifestyle imagery, and coordinated social media promotion,” which had the effect of obfuscating the risk profile of memecoin investing.
The architecture of the Pump.Fun platform, which relies upon a mathematical mechanism known as a bonding curve to eliminate the cost of issuing a memecoin for creators, amplifies the potential financial harm by creating a dynamic whereby early buyers benefit disproportionately, the investor has alleged.
Meanwhile, in failing to verify the age or identity of its users, Pump.Fun exposes minors and inexperienced investors to both financial risk and the explicit material rife on the platform, the complaint alleges. In December, Tweedale told WIRED that Pump.Fun plans to introduce age restrictions but provided no further specifics.
Memecoin trading has frequently been compared to gambling at a casino. But the metaphor is ill-fitting, Burwick claims, because it erases the responsibility to investors that should be borne by the platforms through which memecoins are issued.
“This is not a casino … Retail investors are sold an opportunity to make a return on their investment, but the reality is that they have an entire system they are playing against. They don’t understand how heavily the odds are stacked against them,” says Burwick. “Pump.Fun is not gambling—it’s the illegal issuance of securities.”
Source : Wired
