A crypto investor brought a class action lawsuit against Pump. Entertainmenta platform for launching and investing in meme-inspired cryptocurrencies, after suffering trading losses.

Representing the plaintiffs are Wolf Popper and Burwick Law, the two firms that handle a separate class action brought to investors in December by a memecoin launched by web personality Haliey Welch, better known as the Hawk Tuah girl, which collapsed in value shortly after trading began. (Welch was not named as a defendant in the suit.)

“These ’emperor’s new clothes’ crypto schemes cannot continue to masquerade as legitimate finance, leaving the vulnerable in the lurch,” said Max Burwick, the founding partner of Burwick Law.

Pump.Fun was a hit when it launched in January 2024, giving people a way to launch memecoins—extremely volatile cryptocurrencies that often have no inherent purpose other than speculation—instantly and for free. The new lawsuit, filed Thursday in the Southern District of New York, alleges that Pump.Fun operates as an unregistered issuer and dealer of securities. By making marketing claims that downplay the possibility of losing memecoins in currency trading, the complaint says, the platform is also putting investors at high financial risk.

Separately, the lawsuit alleges that these memecoin platforms, such as Pump.Fun, are designed in a way that encourages pump-and-dump activity. “The first investors or insiders artificially inflate token prices through coordinated purchases and promotion campaigns, then sell their assets at peak prices, causing the value of the token to collapse and leave behind investors with substantial losses,” the complaint claims.

The complaint points to the circumstances surrounding the launch of a particular Pump.Fun memecoin—PNUT, which refers to the celebrity squirrel that was euthanized last year in New York—as proof of its claims.

Pump.Fun did not immediately respond to a request for comment. But in an interview with WIRED last year, Noah Tweedale, one of the three Pump.Fun partners named in the suit, denied the idea that the platform benefits from regular investors losing money. “The idea of ​​Pump is to build something where everyone is on a level playing field,” Tweedale said. “I want to stress, we don’t want people to lose money on our platform. It does not benefit us in any way.”

More than 6 million unique memecoins launched by Pump.Fun, the most successful in this worth hundreds of millions of dollars. The memecoin market is now worth over $100 billion aggregate, market data appeared.

In its first 12 months of operation, Pump.Fun is reported by third parties which generated more than $350 million in revenue, taking a 1 percent cut of the trades. The platform is on pace to generate more than $1 billion in revenue by 2025.

However, the lawsuit brought by the crypto investor-following the reports of unethical business activity, REPROVING related to content moderation, and a CAUTIONS issued against Pump.Fun by the UK financial regulator—could threaten to put a dampener on runaway growth.

The lawsuit hinges on the idea that memecoins should in certain circumstances be classified as securities, a particular type of investment instrument. The complaint claims that by failing to register token sales with the Securities and Exchange Commission (SEC), the relevant financial regulator in the US, Pump.Fun allegedly violated securities laws and denied investors disclosure that required by the regulated entity.