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Investor believes memecoins issued via pump.fun are securities

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A lawsuit claims Pump.fun's memecoins on Solana are securities, alleging $500M in fees and non-compliance with U.S. laws, making it a "joint issuer."

Should tokens created via pumpdotfun qualify as securities? This is what a lawsuit brought against the memecoin issuing platform alleges.

The lawsuit alleges that tokens created on Pump.fun should be subject to U.S. securities regulations. The lawsuit was filed in the U.S. District Court for the Southern District of New York. It claims that Pump.fun has made nearly $500 million in fees from its services while failing to follow securities regulations.

The main argument is that the platform is not just providing tools for users but is actively involved in launching and promoting these tokens, making it a “joint issuer” of unregistered securities. 

Pump.fun is a Solana-based token issuing platform that makes it easy for anyone to create and launch their cryptocurrency, commonly known as memecoins. 

The platform has gained attention for its simple process, where users can create tokens within minutes, often promoting them through social media to generate hype. While some of these tokens have achieved massive gains, others have crashed, leaving investors with significant losses.

The lead plaintiff in the case, Diego Aguilar, alleges that he suffered financial losses from investing in three specific memecoins created on Pump.fun: FWOG, FRED, and GRIFFAIN. These tokens saw rapid price increases but later crashed, causing significant losses for investors.

The plaintiff argued that the platform misled users into believing these tokens were valuable investments without providing necessary disclosures about risks.

This is not the first legal issue for Pump.fun. Earlier in January, another lawsuit accused the platform of selling an unregistered security known as the PNUT token. That token had reached a $1 billion market cap before losing most of its value. The same law firms behind the PNUT case, Burwick Law and Wolf Popper LLP, have also filed the latest lawsuit against Pump.fun.

The U.K.-registered company behind Pump.fun, Baton Corporation, and its co-founders, including CEO Noah Tweedale, are also named in the lawsuit. While the company has not publicly responded to the latest legal action, critics argue that platforms like Pump.fun contribute to market instability by enabling the rapid creation of highly volatile tokens.

The case is unfolding at a time when the U.S. government is reconsidering its approach to cryptocurrency regulation. Under the new presidential administration, the Securities and Exchange Commission (SEC) has signaled potential changes in crypto policies, including stricter oversight of digital assets.

The outcome of this lawsuit could have far-reaching effects on the crypto industry, especially for memecoin investors and developers. If the court rules that all memecoins created on Pump.fun are securities, this could lead to increased regulations and possibly limit the ability of users to freely create and trade these tokens.

A couple of months back, Pump.fun decided to halt its livestreaming feature indefinitely due to pressing safety issues. These problems emerged when creators of memecoins began hosting perilous broadcasts intended to grab attention and market their cryptocurrencies.

Incidents reported included users making harrowing threats of self-harm if their coins didn’t hit specific financial thresholds.

In certain broadcasts, viewers witnessed violent acts, like a person discharging a firearm to celebrate a spike in a coin’s value, along with alarming incidents involving threats to family members and simulated suicide attempts.

One particularly disturbing episode involved a streamer who threatened to injure their pet unless their memecoin achieved a predetermined market cap, which sparked outrage across the crypto community.

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