PumpFun Corp Faces Legal Battles Over Alleged Securities Violations and Meme Token Scandals

• PumpFun Corp faces a lawsuit over unregistered securities and alleged pump-and-dump schemes involving its PNUT Token.
• Claims include lack of investor protections, harmful content promotion, and inadequate regulatory safeguards like KYC and AML protocols.

PumpFun Corp, a cryptocurrency trading platform, is under legal scrutiny for allegedly facilitating unregistered securities and pump-and-dump schemes. 

A lawsuit filed in a New York court by Kendall Carnahan, CEO of Sooner Payments, accuses the company of collaborating with influencers to promote its PNUT Token without registering it with the U.S. Securities and Exchange Commission (SEC).

“Pump.fun has extracted nearly half a billion dollars in fees from investors by selling highly volatile unregistered securities,” the filing stated.

The filing also claims the platform enabled rapid creation and sale of tokens with no intrinsic value, allowing bad actors to exploit investors.

“The platform neither requires nor encourages tokens to have any functional purpose, instead focusing exclusively on their potential for price appreciation through speculative trading.”

Allegations of Ethical Misconduct

The lawsuit asserts that PumpFun has prioritized speculative trading over ethical and regulatory standards. The platform allegedly collected nearly $500 million in fees while omitting essential safeguards such as Know Your Customer (KYC) protocols, anti-money laundering measures, and risk disclosures.

Critics claim this has allowed the platform to operate without accountability, exposing investors to financial risks.

“The idea with Pump was to build something where everyone was on the same playing field,” Tweedale said. “We don’t want people to lose money on our platform. It doesn’t benefit us by any means.”

Further claims suggest PumpFun hosted tokens promoting harmful content, including hate speech and violence. A now-suspended livestream feature allegedly allowed token issuers to manipulate prices through extreme stunts, such as faked suicides, raising concerns about the company’s governance.

Developer and Platform Profiteering

Carnahan’s lawsuit contends that the platform’s design primarily benefits token developers and the company itself, leaving ordinary investors at a disadvantage. Critics have long accused PumpFun of enriching its creators while leaving retail investors holding worthless tokens. 

In response, co-founder Noah Tweedale defended the platform, stating its intent was to create a level playing field. 

“We don’t want people to lose money. It doesn’t benefit us by any means” Tweedale told WIRED last year.

Memecoin Collapse Spurs Additional Lawsuits

The controversy intensified following the collapse of the Hawk memecoin in December. Launched through PumpFun in collaboration with influencer Haliey Welch, the token lost over 90% of its value within hours of going live.

If you’ve been affected, fill out this no-cost, no-obligation intake form: https://t.co/c9ak4AThsG .

Today, Burwick Law is announcing publicly that we are pursuing legal action on behalf of investors in pumpdotfun memecoins. This announcement follows months of working alongside…

— Burwick Law (@BurwickLaw) January 15, 2025

This prompted two law firms, Wolf Popper and Burwick Law, to file a separate class-action lawsuit, urging affected investors to seek justice for their losses.

Burwick Law criticized PumpFun’s business model, likening it to deceptive financial schemes.

The firm’s managing partner, Max Burwick, argued that while memecoins might resemble gambling, their susceptibility to manipulation places them in a separate, unregulated category of speculative assets.

Community Debate on Accountability

Crypto security analyst ZachXBT weighed in on the issue, dismissing claims by affected investors as misguided. Labeling them “degenerate gamblers” he argued that investing in high-risk memecoins does not equate to being a victim.

If silly lawsuits come out of this perhaps I need to release a tutorial for people to fund addresses anonymously on-chain to cause chaos and make it harder for them to be sued. pic.twitter.com/z9aCcGkBgR

— ZachXBT (@zachxbt) January 16, 2025

Burwick countered, emphasizing that memecoins’ speculative nature requires clearer definitions and regulations to ensure fairness.