A crypto investor has filed a class action lawsuit against Pump.Fun, a platform for launching and investing in meme-inspired cryptocurrencies, after suffering trading losses.
The plaintiffs represent Wolf Popper and Burwick Law, the two firms handling a separate class action filed by investors in December over a memecoin launched by web personality Haliey Welch, better known as the Hawk Tuah girl, who emerged shortly after the start of the trade plummeted in value. (Welch was not named as a defendant in that lawsuit.)
“These 'Emperor's New Clothes' crypto schemes cannot continue to masquerade as legitimate funding, leaving the vulnerable behind,” said Max Burwick, founder of Burwick Law.
Pump.Fun was a hit when it launched in January 2024, giving people a way to launch memecoins – highly volatile cryptocurrencies that typically have no inherent purpose other than speculation – immediately and for free. The new lawsuit, filed Thursday in the Southern District of New York, alleges that Pump.Fun has operated as an unregistered issuer and seller of securities. By making marketing claims that downplay the likelihood of losing money when trading memecoins, the complaint states, the platform also puts investors at increased financial risk.
Additionally, the lawsuit alleges that these memecoin platforms, such as Pump.Fun, are designed to encourage pump-and-dump activity. “Early investors or insiders artificially inflate token prices through coordinated purchasing and promotional campaigns, and then sell their holdings at peak prices, causing the token's value to collapse and leaving subsequent investors with significant losses,” the complaint alleges.
The complaint points to the circumstances surrounding the launch of a particular Pump.Fun memecoin – PNUT, which refers to the famous squirrel that was euthanized in New York last year – to prove 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 three Pump.Fun co-founders named in the lawsuit, refuted the idea that the platform benefits 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 emphasize that we don't want people to lose money on our platform. It doesn't benefit us in any way.”
More than 6 million unique memecoins have been launched through Pump.Fun, the most successful of which are worth hundreds of millions of dollars. Market data shows that the memecoin market is now worth more than $100 billion in total.
According to third parties, Pump.Fun generated more than $350 million in revenue in its first 12 months of operation, with a 1 percent reduction in transaction volume. The platform is on track to generate more than $1 billion in revenue by 2025.
However, the lawsuit filed by the crypto investor – which follows reports of unethical trading activities, criticism regarding content moderation and a warning against Pump.Fun by the UK financial regulator – could threaten to dampen the out-of-control growth.
The lawsuit revolves around the idea that in some circumstances memecoins should be classified as securities, a certain type of investment instrument. The complaint alleges that by failing to register token sales with the Securities and Exchange Commission (SEC), the relevant U.S. financial regulator, Pump.Fun allegedly violated securities laws and denied investors the disclosures required of regulated entities.
