- A class-action lawsuit has been filed against Pump.Fun creator Baton Corporation Ltd. for allegedly selling unregistered securities in violation of federal law
- The lawsuit claims Pump.Fun’s memecoins, including the PNUT Token, are securities that were not registered with the SEC and were marketed using manipulative and misleading tactics
- The plaintiff accuses Pump.Fun of extracting nearly $500 million in fees and fostering risky investments, targeting inexperienced investors with inadequate protections
Pump.Fun creator Baton Corporation Ltd. has been hit with a federal class-action lawsuit alleging violations of the Securities Act through the sale of unregistered securities like the PNUT Token. The complaint, filed by plaintiff Kendall Carnahan, accuses the company of deceptive practices, claiming its tokens lack proper registration with the SEC and were promoted using aggressive and misleading tactics. Pump.Fun is alleged to have facilitated speculative trading on an unregulated platform, resulting in substantial investor losses while profiting nearly $500 million in fees.
From Larks to a Lawsuit
Pump.Fun was the hot-button topic in the crypto market a few months ago, with its livestreaming service attracting negative attention and eventually being pulled. Now, however, things are getting even more serious for its creator thanks to the class-action lawsuit filed in the Southern District of New York.
Plaintiff Kendall Carnahan alleges that the company, along with its founders Alon Cohen, Dylan Kerler, and Noah Tweedale, violated securities laws by selling unregistered tokens like the PNUT Token, which debuted in October 2024.
The lawsuit argues that the PNUT Token meets the definition of a security under the Howey Test, as its value relies on the efforts of Pump.Fun’s promotional activities. The complaint highlights that no registration statement was ever filed with the SEC, a fundamental requirement for securities offerings.
Pump.Fun is a “Ponzi”
The lawsuit cites promotional campaigns that exaggerated potential returns without disclosing the inherent risks, and likens the platform to a pump-and-dump scheme:
Pump.Fun’s core function is to work alongside influencers to co-issue and market unregistered securities. Inherent to its operations are a novel evolution in Ponzi and pump and dump schemes.
Pump.Fun is described as a platform designed to streamline the creation and trading of memecoins, employing tools that make token launches quick and accessible, but the complaint alleges that the platform capitalized on the “attention economy,” relying on Internet culture to promote tokens that often carried harmful or offensive themes.
Furthermore, the platform reportedly lacks basic investor protections like Know Your Customer (KYC) procedures and anti-money laundering protocols, enabling speculative investments from inexperienced users, including minors.
Retail Investors Bore the Brunt
The filing details widespread financial losses among retail investors, many of whom were drawn by promises of “100x” returns showcased through flashy social media campaigns featuring luxury imagery.
Despite these promises, the complaint notes that most tokens quickly lose value, leaving investors with significant losses while Pump.Fun collects transaction fees. The plaintiff’s counsel asserts, “This case is about accountability for those who exploit the unregulated nature of the cryptocurrency market.”
