Key Highlights
- A federal judge has allowed investors to file a second amended complaint in the class action lawsuit against Pump.fun.
- The lawsuit alleges the platform used a deceptive “fair launch” mechanism to facilitate rigged token launches and insider manipulation.
- Plaintiffs argue the system was intentionally designed to prioritize protocol fees while exposing retail participants to financial losses.
A federal judge in the Southern District of New York has allowed plaintiffs to submit a second amended complaint in the ongoing class action suit against Baton Corporation, also known as the Solana-based memecoin launchpad Pump.fun.
This development in the suit, shared by Burwick Law on X, is led by plaintiffs Diego Aguilar, Kendall Carnahan, and Michael Okafor. It signals an escalation in intensity in the case as it gears up to include new claims about racketeering activities and market manipulation.
The decision, issued by Judge Colleen McMahon, permits the plaintiffs’ side to include new claims about how the underlying architecture of the full system was designed not for an actual marketplace but for a fixed one, which would then accrue maximum profit from the protocol for non-accredited traders.
“The nexus of the new challenge is centered on the automated bonding curve function on the site and the presumed absence of any regulatory protections on the site,” the filing reads.
According to the new filing, the plaintiffs are charging that the operations of the site involved the provision of ‘front facing slot machine cabinets’ that sought to drain more than $5.5 billion from users.
Allegations of the ‘Digital Slot Machine’
The plaintiffs’ suit contends that despite the site touting the fairness of token issuances on the site, the site facilitated the operation of a ‘bipartite scheme involving insiders and automated bots’ that facilitated the ability for early market participants to ‘front-run’ retail buyers of the tokens on the site.
As a result of the marketing model adopted by the site, all the tokens issued on the site subsequently dropped to zero for the benefit of users who were then left on the site, with the site netting hundreds of millions of dollars from the 99 percent of users who lost all of their funds on the site.’
The lawsuit dates back to early 2025, following a surge of complaints from investors related to the PNUT token and other volatile memecoins. Early filings focused primarily on issues concerning securities laws, claiming that the launching of the tokens on the exchange constituted an unregistered investment contract.
The initial action against Baton Corporation was sparked by allegations that Pump.fun facilitated a pump-and-dump ecosystem. The plaintiffs claimed that the platform’s structure intentionally bypassed investor protections to generate massive fee revenue from failed tokens.
However, the litigation itself took a bizarre turn when a memecoin named “DOGSHIT2” saw a 67% price surge following reports that it was allegedly tied to the very law firm representing the victims. This connection drew scrutiny from the crypto community, as it raised questions about the optics of legal representatives potentially engaging with the same volatile market mechanisms they were critiquing in court.
From unregistered securities to civil RICO
The lawsuit has since expanded to include civil RICO allegations in relation to the larger scheme for digital assets in which the exchange had been involved, including its infrastructure partners, Solana Labs and Jito Labs. Early versions of the lawsuit had emphasized the exchange’s livestreaming service, characterized by the lawyers as infrastructure used to create artificial enthusiasm in the form of anti-social and profoundly disturbing content to facilitate volume.
The implications of the continued evolution of this second amended complaint are very serious for the decentralized finance industry at large. The court’s decision to permit claims of RICO will lead to treble damages, which can result in triple damage financial responsibility against defendants if they are found guilty of racketeering.
The plaintiffs’ effort to include the infrastructural companies in this lawsuit has challenged the long-held industry view that blockchain developers and foundations are non-partisan actors and cannot be held accountable for the actions that take place within these infrastructures. The eventual decision of the court in favor of the plaintiffs could lead to all token launchpads being mandated to offer similar financial regulations offered by conventional exchanges.
The court has allowed the enlarged complaint regarding Pump.fun, ensuring that the case involving the latter will be a highlight of crypto-related legal discourse throughout 2026. The evolution from a basic violation of securities laws to a complaint of racketeering practices may very well indicate a sterner approach being adopted in holding high-grossing crypto projects accountable for system-related losses.
Also Read: Kalshi Challenges Connecticut Gambling Laws in Court
