Pump.fun Faces Lawsuit Over Alleged Unregistered Security Memecoins

Solana-based memecoin platform Pump.fun has been hit with a proposed class-action lawsuit in a New York federal court, alleging that all tokens created on the platform qualify as unregistered security memecoins under U.S. securities laws. The suit, filed on January 30 by investor Diego Aguilar, claims that Pump.fun, operated by the UK-based Baton Corporation Ltd., earned nearly $500 million in fees while facilitating the issuance and trading of these tokens.

According to the filing, Pump.fun allegedly collaborated with influencers to manufacture hype around newly launched memecoins, creating an artificial sense of urgency that lured retail investors into highly volatile trades. The lawsuit claims that Pump.fun’s business model mirrors Ponzi and pump-and-dump schemes, leaving many investors with significant losses.

Pump.fun Accused of Controlling Token Issuance and Pricing

Aguilar’s lawsuit asserts that Pump.fun is more than just a trading platform—it allegedly acts as a direct issuer and statutory seller of the tokens, maintaining control over their liquidity, pricing mechanisms, and marketing strategies. This, the complaint argues, makes every token on Pump.fun an unregistered security under the U.S. Securities Act of 1933.

“Pump.fun’s core function is to work alongside influencers to co-issue and market unregistered security memecoins. Inherent to its operations is a novel evolution in Ponzi and pump-and-dump schemes,” the lawsuit claims.

The filing also names three individuals as defendants: Alon Cohen, Dylan Kerler, and Noah Bernhard Hugo Tweedale, all of whom are listed as officers of Baton Corporation in the UK’s Companies House registry.

Aguilar, who purchased multiple memecoins from the platform, is not just seeking personal damages but restitution for all investors affected by Pump.fun’s alleged misconduct. The lawsuit demands:

Rescission of all memecoin purchases on Pump.fun.

Monetary damages to compensate investors for their losses.

Legal costs and further relief as determined by the court.

Burwick Law Also Targeting Pump.fun

This lawsuit follows growing legal scrutiny of Pump.fun. Earlier in January 2025, the U.S. law firm Burwick Law announced that it was preparing legal action against Pump.fun, citing widespread investor losses tied to memecoin rug pulls and unfulfilled promises.

“In the past few months, Pump.fun has collected hundreds of millions of dollars in fees while illicit drug use, self-harm, racism, antisemitism, lewd acts, bestiality, violent and other antisocial acts were displayed on the platform,” Burwick Law alleged.

Despite these legal challenges, Pump.fun has continued to see massive user engagement. Just this past week, the platform recorded an all-time high of $3.3 billion in weekly trading volume, fueled by the launch of Trump family-themed memecoins.

Are Memecoins Securities?

The lawsuit against Pump.fun reignites the ongoing debate over whether memecoins qualify as securities under U.S. law. The Securities and Exchange Commission (SEC) has repeatedly taken action against projects that offer tokens with investment-like characteristics without registering them.

Crypto legal expert Jake Chervinsky, Chief Legal Officer at Variant, weighed in on the issue, stating:

“If a platform like Pump.fun is actively controlling token liquidity and pricing while working with influencers to market these assets, there’s a strong argument that these tokens meet the Howey Test for securities.”

The Howey Test, established by the U.S. Supreme Court, defines a security as an investment contract where profits are expected from the efforts of others. If Pump.fun’s tokens are deemed to meet this definition, it could lead to further regulatory crackdowns on memecoin platforms.

However, some crypto industry leaders argue against this classification. Gabriel Shapiro, General Counsel at Delphi Labs, believes that most memecoins should not be classified as securities because they lack ongoing managerial efforts post-launch.

“Memecoins often function more like collectibles than securities. The lack of investor expectation for long-term returns makes their classification under securities laws questionable.”

Pump.fun’s Legal Battle Could Shape the Future of Memecoins

The outcome of this case could set a major precedent for the broader memecoin industry. If the court rules that Pump.fun’s tokens are unregistered security memecoins, it could open the floodgates for SEC enforcement actions against similar platforms.

The case also raises concerns about retail investor protections in the largely unregulated memecoin market. Unlike traditional financial markets, memecoins are often created and promoted with little oversight, leading to a high-risk environment prone to manipulation and fraud.

At the time of writing, Pump.fun and Baton Corporation have not responded to requests for comment. Information on legal representation for the defendants was not immediately available.

As the legal battle unfolds, investors should exercise caution when trading memecoins, particularly those launched through Pump.fun or similar platforms. With increasing legal scrutiny and potential regulatory action, the memecoin industry may soon face stricter oversight, fundamentally altering how these tokens are created and traded.

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