Pump.fun, one of the most successful crypto projects of last year, is facing a class action lawsuit for alleged violations of securities law.
The lawsuit specifically names the sale of popular meme coin Peanut the Squirrel (PNUT) as unlawful. While the sole plaintiff is claiming to have lost just $231, they are bringing the claim on behalf of a much larger group.
Filed on Thursday in the Southern District of New York, the lawsuit claims that Pump.fun has been offering and selling an unregistered security as the result of negligence or strict liability. It doesn’t claim the project’s founders have committed fraud or intentional or reckless conduct, but still seeks to hold them accountable.
The filing demands a trial by jury in New York.
“Our complaint alleges that Pump.fun markets itself as promoting financial freedom and censorship-resistance,” Burwick Law, the firm that filed the lawsuit, posted on X. “While in practice, it has displayed racist, antisemitic, torture, and sexual content on its homepage and exploited the hopes of everyday people—including minors—to collect hundreds of millions of dollars in fees.”
**LITIGATION ALERT: PUMPDOTFUN CLASS ACTION FILED**
Burwick Law, a leading crypto law firm, and @WolfPopperLLP, a leading securities law firm, have filed a federal class action lawsuit on behalf of crypto investors against the creators of PumpdotFun, a prominent memecoin… pic.twitter.com/XEWpCNn0rM
— Burwick Law (@BurwickLaw) January 17, 2025
The defendants include UK entity Baton Corporation Ltd, which the lawsuit claims does business under the name Pump.fun, as well as its founders: Alon Cohen, Dylan Kerler, and Noah Bernhard Huge Tweedale (better known as Sapijiju).
Only one plaintiff, Kendall Carnahan, is named in the suit. They’re being represented by attorneys from Wolf Popper LLP and Burwick Law—the firm that also recently filed a claim against creators of the Hawk Tuah token. However, the plaintiff claims there could be “hundreds or thousands” of victims who were damaged by PNUT and the suit has been filed on behalf of all similarly affected Pump.fun users.
“This is typical in securities class actions, where a representative plaintiff brings claims on behalf of a larger group affected by the same alleged unlawful practices,” Carlo D’Angelo, a crypto criminal defense lawyer, told Decrypt. If successful, the lawsuit would be seeking much more than Carnahan’s individual losses.
Carnahan claims to have bought PNUT via three transactions on November 4. A day later they sold it all at a loss of just $231. PNUT then skyrocketed over 4,134% over the coming nine days to a $2.4 billion market cap.
Neither Cohen nor Tweedale immediately responded to Decrypt’s request for comment.
Devs or founders?
To launch a token on the launchpad, users simply have to fill in a handful of boxes before, optionally, purchasing some tokens. This then creates a token using Pump.fun’s standardized contracts. The lawsuit argues that means the platform and its founders, not the token deployers or developers, bear the blame.
“Token developers on Pump.Fun function merely as participants within Pump.Fun’s rigid framework rather than independent issuers,” the lawsuit said. “Pump.Fun maintained centralized control over the token marketing, exchange listings, and market activities,” the filing later states.
With this simplified token creation process, more than 6 million tokens have been created using the platform in its year lifespan—accounting for up to 71% of new tokens launched on Solana each month. As a result, Pump.fun has made over $420 million in revenue—collected through fees charged per transaction.
The lawsuit alleges that once a token achieves a “certain level of success” the platform begins to market specific tokens and that PNUT was a prime example. That said, Decrypt only found two tweets with the words “Peanut” or “PNUT”—one of which was congratulating it on hitting a $1 billion market cap.
On top of this, the lawsuit claims that Pump.fun’s design promotes “child abuse, potentially underage pornography, antisemitism,” and more as people look to increase their token’s value through controversial stunts. This is best illustrated by the Pump.fun dev that set himself on fire for his TruthOrDare (DARE) token in an attempt to pump his token. Mikol, the dev, was immediately rushed to hospital with third degree burns across his body.
Exhibit B of the lawsuit details 12 Pump.fun tokens that are either racist, abusive, or dangerous in nature. It claims that Pump.fun knowingly facilitates and promotes tokens that exploit hate speech, violence, and exploitation to generate trading volume.
What have crypto degens done in response? Invest in these tokens, of course, with one trader claiming to be up $8,000 in just two hours.
One of the named tokens features a woman in her underwear tied to a chair, with the token creator claiming they’d perform sexual acts once the token hit a $100,000 market cap. This came amid an alarming livestreaming trend that saw multiple controversial streams go viral, climaxing with someone faking their suicide before the feature was pulled from the site.
While this is shocking, the lawsuit also claims that the site fails to implement basic investor protections that apply in this situation. Namely, there is no age verification on the site with numerous tokens on the site that are not suitable for underage audiences—although there is a not safe for work tag. There is also no know-your-customer, anti-money-laundering, or risk disclosures on the site.
This isn’t the first time that Pump.fun has found itself in the middle of controversy.
In May, it was drained for an estimated $2 million worth of Solana by a disgruntled employee that had qualms with how the company was being run. Jarett Dunn, the ex-employee, is currently facing charges of abuse of position and transfer of criminal property at Wood Green Crown Court, which he is seeking to withdraw his guilty plea.
Then following the livestreaming controversies, UK regulator the Financial Conduct Authority issued a warning against the platform. This led to Pump.fun restricting users from the UK from accessing the site.
Edited by Stacy Elliott.
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Source: https://decrypt.co/301526/lawsuit-pump-fun-solana-meme-coins-pnut
