Memecoin maker Pump.Fun accused of cranking out ‘unregistered securities’

Racist content. Offensive livestreams. Pumping tokens with no intrinsic value.

A plaintiff cited a number of problematic features in Pump.Fun’s one-click launchpad for memecoins in a lawsuit filed Thursday.

But Pump.Fun’s alleged cardinal sin?

Selling its tokens without registering them with the US Securities and Exchange Commission, the plaintiff argue in a class action submitted in federal court in New York. The suit seeks unspecified damages.

“Pump.Fun’s core function is to work alongside influencers to co-issue and market unregistered securities,” said the lawsuit.

Alon Cohen, the company’s chief operating officer, did not return DL News’ request for comment.

Euthanised squirrel

The lawsuit alleges that Baton Corp, the owner of Pump.Fun, and the memecoin venture’s three co-founders violated US securities laws in connection with one specific token: PNUT, named after a pet squirrel euthanised by New York state officials last year.

It also accuses them of participating in pump-and-dump schemes and profiting off “racist, antisemitic, torture, and sexual content,” though those allegations are not cited as a violations of the law.

Pump.Fun was launched in January 2024 by Cohen, Dylan Kerler, the chief technical officer, and Noah Bernhard Hugo Tweedale, the CEO.

Based in the UK, the venture helped spark a boom in memecoin trading by simplifying the process of creating the jokey tokens.

Previously, would-be memecoin creators needed to know how to code. With Pump.Fun, they only needed to choose the token’s name.

Memecoin boom

As a result, Pump.Fun has made a splash in a $127 billion market that until recently was a freewheeling frontier with very little structure.

Tens of thousands of memecoins are launched on Pump.Fun every day, and it has amassed $2.2 billion in fees, according to an estimate by Dune.

The plaintiff in the case is making the same argument the SEC has made against numerous crypto platforms under Gary Gensler, its outgoing chair, over the last four years.

The regulator has contended that most cryptocurrencies must comply with the same laws that govern the issuance of stocks and bonds, including registration.

The crypto industry has fought the allegations and is hopeful President-elect Donald Trump will end the SEC’s crackdown after he takes office on Monday.

In this case, the plaintiffs have zeroed in on one memecoin: PNUT, which was named after a pet squirrel euthanised by New York state officials last year.

When he was seized on October 30 — owning wild animals is illegal in New York — P’Nut the squirrel bit a wildlife biologist and had to be tested for rabies. The rabies test can only be done on dead animals.

Crypto supporters, including Elon Musk, decried the squirrel’s death as government overreach.

PNUT, hit the market on October 31 and its market value soared to $2 billion by the next month. According to the lawsuit, Pump.fun helped launch PNUT.

One trader hit the jackpot, making $3 million by selling PNUT tokens originally purchased for $17.

But many memecoin traders struggle to properly time the extreme volatility in such tokens. PNUT has lost 75% of its value since that November peak.

Degrading acts

The legal action touches on another controversy that roiled Pump.Fun in recent months: a livestream feature that allowed memecoin issuers to broadcast videos of themselves.

Designed as a tool to create buzz and bolster the value of the coins, it rapidly morphed into something else.

Memecoin creators performed degrading acts and threatened to shoot their pets, and one creator said he would was going to commit suicide if people didn’t buy his cryptocurrency. It was fake stunt, DL News reported in November.

Pump.Fun removed the livestreaming feature from its website that month.

Aleks Gilbert is a New York-based DeFi correspondent for DL News. You can reach him at aleks@dlnews.com.