A lawsuit against Pump.fun and Solana executives has been refiled. It claims that executives orchestrated a wide-ranging pump-and-dump scheme. But the lawsuit provides scant evidence for those claims. Private messages show a Pump.fun founder saying most investors lose when they buy memecoins on the platform.
Burwick Law, a firm with a reputation for suing and trolling crypto companies on behalf of unhappy retail investors, refiled a lawsuit accusing Pump.fun, Solana Labs, the Solana Foundation, and their executives of creating a “rigged, unlicensed gambling operation.” As promised, it included information gleaned from private messages exchanged between the Pump.fun founders. In December, a federal judge gave Burwick permission to file its second amended lawsuit against the same group featuring new information, including 5,000 private messages that supposedly show Solana Labs and Pump.fun engineers discussing the alleged scheme in real time. The latest version reiterates the claim that Pump.fun, marketed as a game of chance, was, in fact, a “rigged casino” whose leaders “secretly predetermined who would win and who would lose, and extracted enormous profits from retail participants.”
That bombastic claim relies on the fact that Solana enables users to move ahead in the transaction queue by paying “tips.” That allows people who know a token will launch soon to gobble up a significant portion of its supply the moment it launches, ensuring they can sell at profit into the retail demand that follows, according to the lawsuit. Some of the new information in the lawsuit is damning. In a private message, for example, co-founder Alon Cohen acknowledged that most investors “lose” when they invest on his platform. “We democratised trading lowcaps so much that everyone is exposed to the really, really low odds that come with gambling such low mcaps,” he wrote, referring to little-known cryptocurrencies with market capitalisations below $50,000. If Pump.fun were to better account for investors’ interests and risk tolerances, “people will generally be happier (even though most lose); people will play the game they’re naturally suited to playing.” Cohen did not immediately respond to a request for comment. The suit also notes Burwick could’ve cherry-picked the most damning messages and, assuming they’re real, presented them in the least flattering light.
Burwick also presented some serious claims levelled by informants — unnamed crypto influencers, also known as key opinion leaders, or KOLs. They told the law firm they or their peers were paid to promote memecoins to their thousands of followers without disclosing the arrangement. Their alleged reward? Being told which memecoins to purchase in advance, according to the lawsuit. When the coordinated promotion campaign went into high-gear, their tokens would appreciate, and they would sell carefully, on a predetermined schedule, in order to avoid cratering the price, according to the lawsuit. Burwick cites “standard Pump.fun agreements,” one of which was shared by Informant #2, a “prominent KOL.” That agreement “has terms concerning scripts, script ideas, and project proposals, confirming that purportedly organic promotional content was coordinated with Pump.fun,” the lawsuit reads. But it isn’t clear whether this was standard practice — how frequently such contracts were used, and whether they always originated with Pump.fun, as opposed to memecoin creators acting independently to pump their own tokens.
Critically, it isn’t clear why Pump.fun executives would do this. The lawsuit doesn’t convincingly show that they personally profited from this sort of front-running. With limited evidence that Pump.fun coordinated these alleged pump-and-dump campaigns, and with no hard evidence its executives profited directly, what, exactly, made the platform a “rigged casino” purpose-built “to generate illicit profits”? Failure to level the playing field, according to the lawsuit. “No defendant created guardrails for retail participation,” it says. “No defendant implemented randomised entry windows that would make it harder for bots or insiders to position first.” The lawsuit says Pump.fun profited off the “rigged casino” because it took a cut of every transaction. The logic is shaky. Sure, ensuring creator profits would drive new memecoin generation, but it would also drive away retail investors. As for Solana’s role in all this, Burwick claims that Pump.fun wouldn’t have been able to pull off its alleged scheme “without Solana’s network speed, priority fee system, and the March 2024 congestion updates that enabled memecoin trading at scale.” Here, it feels as though the plaintiffs are grasping at straws. Burwick didn’t immediately respond to a request for comment. Maybe more will come out in discovery, if the judge lets this move forward. For now, I remain unconvinced that Pump.fun is a “coordinated criminal organisation.” Still, I’d tell my crypto-curious friends to stay clear of memecoins. After all, most lose.
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