PumpFun Corp is facing allegations of running cryptocurrency pump-and-dump schemes. On Thursday, Kendall Carnahan, CEO of Sooner Payments, filed a lawsuit in a New York court, accusing the company of working alongside influencers to issue unregistered securities, described as Ponzi schemes.
Carnahan, the lead plaintiff in the case, and his attorneys claim that Pump.fun’s-launched PNUT Token violated financial regulations by promoting it without proper registration with the U.S. Securities and Exchange Commission (SEC).
The complaint went on to accuse Pump.fun of enabling bad actors to create and sell worthless tokens within minutes using its advanced tools. According to the plaintiff, several tokens on the platform lack utility, which suggests that investments in them are solely for the purpose of profit.
“Pump.fun has extracted nearly half a billion dollars in fees from investors by selling highly volatile unregistered securities,” the filing stated, “The platform neither requires nor encourages tokens to have any functional purpose, instead focusing exclusively on their potential for price appreciation through speculative trading.”
Pump.fun faces ethical violations concerns
The plaintiff alleged that the platform does not protect investors, as it has omitted Know Your Customer (KYC) procedures, anti-money laundering protocols, and risk disclosures. They backed these claims by pointing out the ease with which individuals, regardless of age, can create accounts and purchase tokens in under five minutes.
Further allegations stressed that some tokens launched on Pump.fun promoted harmful content, including antisemitism, racism, self-harm, and violence. The launchpad’s now-suspended livestream feature, taken down in November last year, allegedly enabled token issuers to perform extreme stunts, including faked suicides, to manipulate token prices.
“Pump.fun has created an environment that disregards basic ethical and legal standards,” the case files noted.
The lawsuit also alleges that Pump.fun primarily benefits token issuers and the platform’s developers, leaving ordinary investors at a disadvantage. Netizens have long accused the company of enriching developers, while regular investors suffer the fate of keeping worthless tokens.
However, in an interview with tech news source WIRED last year, Noah Tweedale, one of Pump.fun’s co-founders, who were named in the lawsuit, defended the platform’s integrity.
“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.”
Launchpad’s legal troubles spark debate on meme tokens
Yesterday, two law firms, Wolf Popper and Burwick Law, announced they are pursuing a separate class-action suit on Pump.fun, brought forward by investors over the infamous Hawk memecoin that collapsed in early December.
The token, launched by a team of developers in collaboration with web personality Haliey Welch, lost over 90% of both its value and market cap hours after it went live on December 5. Burwick is now calling for victims who counted losses to bring their cases forward in their pursuit of seeking justice at the expense of Pump.fun memecoin projects.
Max Burwick, founding partner of Burwick Law, criticized the meme token launchpad on X, stating, “These ‘emperor’s new clothes’ crypto schemes can’t keep masquerading as legitimate finance, leaving the vulnerable in the lurch.”
Crypto security sleuth ZachXBT replied to the law firm’s post, calling those affected “degenerate gamblers” that chose to invest in small-capped memecoins and reiterating that they shouldn’t call themselves victims.
👏 degenerate 👏 gamblers 👏 willingly 👏 choosing 👏 to 👏 gamble 👏 on 👏 micro-cap 👏 meme 👏 coins 👏 are 👏 not 👏 actual 👏 victims 👏 or 👏 investors 👏
— ZachXBT (@zachxbt) January 15, 2025
A few minutes later, Burwick responded to ZachXBT, quoting a post made earlier on by managing name partner Max Burwick, which argued that memecoins are open to manipulation and cannot be equated with regulated gambling.
“The reality is that memecoins aren’t gambling in the traditional sense, as defined by regulations and rules. They are speculative assets that can be manipulated through multiple means. So, I suppose it all depends on how you define gambling, or if gambling should be fair or fixed?” Max explained.
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