Written by: Luke, Mars Finance
Once, the Meme coin issuance platform Pump.fun on the Solana blockchain was a digital amusement park that never closed, a money-making machine that made fortunes daily. Here, for less than $2, anyone could create a new cryptocurrency in minutes and dive into frenzied speculative feasts. However, the clamor has abruptly ceased. Now, this amusement park's lights are out, plunged into silence. It faces multiple class-action lawsuits in New York Federal Court, and its most important promotional platform—its official account on social platform X—has also been permanently banned.
The sudden collapse of Pump.fun is not an isolated incident; it is more like a prism reflecting the profound internal contradictions behind the Meme coin craze. This is a collision between a no-entry, gamified financial experiment and the cold realities of securities law, centralized platforms wielding life-and-death power, and the harsh rules of market economics. Is this digital carnival merely a fleeting bubble, or does it herald the rise of a new, untameable force of market speculation? Its trajectory of rise and fall provides us with an excellent dissection sample.
1. Dissection of the Meme Factory: Rise and Decay
The rise of Pump.fun stems from its extreme 'democratization' of the financial speculation threshold, while its decline is rooted in the systemic flaws inherent in this model.
'Innovation': Opening the Casino Doors to Everyone
The core mechanism of Pump.fun lies in its extreme simplification of the token creation process on the Solana blockchain, creating a one-stop platform for both Meme coin creation and trading. Its soul is a mathematical model known as the 'Bonding Curve'. Under this model, the price of tokens automatically rises with increasing purchase demand, which not only creates tremendous incentives for early participants but also provides endless fuel for speculative frenzy. This mechanism is packaged as a 'fair issuance', quickly making Pump.fun the 'Meme coin casino' in the vernacular of the community.
This casino business was exceptionally hot. The platform built a lucrative business model by charging a 1% exchange fee on every transaction and a fee of 1.5 SOL for tokens that 'graduate' (i.e., reach a certain market cap to list on decentralized exchanges). By early 2025, the total fees collected by the platform had approached $500 million, with daily revenue peaks exceeding $15 million, making it a highly efficient money-printing machine.
Intrinsic Decay: A System Built on Fraud
However, beneath the surface of prosperity lies a shocking reality. A devastating report released by risk analysis firm Solidus Labs revealed that as much as 98.6% of the tokens issued on Pump.fun exhibit typical characteristics of a 'Pump-and-Dump' scam, ultimately plummeting to zero and becoming worthless. This data completely strips away the platform's guise of 'innovation' and 'fairness', exposing its true nature as an industrial-scale fraud incubator.
The relationship between the platform's business model and fraudulent activities is not merely one of tacit approval, but rather a deep symbiosis. Pump.fun's revenue is directly linked to the issuance and trading volume of tokens on its platform. Since the vast majority of transactions stem from fraudulent pump-and-dump schemes, the platform's nearly $500 million in massive revenue is, in fact, derived from facilitating these scams. This creates a distorted incentive mechanism: the platform, in pursuit of revenue maximization, inevitably prioritizes lowering barriers to entry and increasing trading volume over strengthening safety checks and protecting investors. This renders its so-called commitment to 'fair issuance' particularly hollow.
The platform's vulnerabilities have long been exposed. In May 2024, a former employee exploited their privileged access to steal assets worth about $1.9 million through a flash loan attack, revealing significant flaws in its internal controls. In February 2025, its official X account was hacked to promote scam tokens, once again highlighting its insufficient resilience against external risks. Furthermore, legal documents accuse the platform of profiting massively in an environment rife with illegal and anti-social content, adding a layer of moral and reputational stain.
2. Legal Liquidation: When Meme Coins Encounter the Howey Test
When wild financial experiments touch the legal red line, a liquidation is inevitable. In January 2025, two key class-action lawsuits were filed in the Southern District of New York Federal Court, putting Pump.fun and its underlying entities and founders in the defendant's seat.
Legal Crackdown
The lawsuit was initiated by law firms such as Wolf Popper LLP and Burwick Law, with defendants including Pump.fun's UK operating entity Baton Corporation Ltd., and its founders Alon Cohen, Dylan Kerler, and Noah Bernhard Hugo Tweedale. The core accusation is that Pump.fun promoted and sold a large number of unregistered securities through its platform, openly violating the U.S. Securities Act of 1933. The plaintiffs demand the platform refund all investors' purchase amounts and compensate for the economic losses incurred, amounting to nearly $500 million.
The core legal weapon of this lawsuit is the 'Howey Test', born in 1946, which is the gold standard for determining whether an investment constitutes a 'security'. The plaintiffs' argument is highly disruptive: they believe that Pump.fun is far from a neutral technical tool provider, but rather an active participant in token issuance and sales, a 'statutory seller' and 'joint issuer'.
The support for this argument lies in the fact that Pump.fun has deep control over the entire process from token creation to trading: it provides standardized token creation tools, controls liquidity and pricing through the bonding curve mechanism, and actively promotes these tokens using its platform and influencer partnerships. The lawsuit describes this model as 'a new evolution of Ponzi and Pump-and-Dump schemes'. This legal strategy marks a significant evolution in cryptocurrency litigation. In the past, regulators typically targeted individual token issuers (such as the SEC's lawsuit against Ripple), but faced with thousands of anonymous creators on Pump.fun, this method is inefficient. Now, the plaintiffs choose to directly hit the nail on the head—holding the platform itself as the responsible party. If this logic holds in court, then any platform that provides standardized tools, controls pricing mechanisms, and participates in promotions could be deemed an unregistered securities seller. This would fundamentally destroy the business model of such 'Issuance Platform as a Service'.
Caught Between Two Regulatory Eras
This lawsuit happens to occur during a period of drastic transformation in U.S. cryptocurrency regulatory policy. It emerges in the waning days of the 'enforcement regulation' era led by former SEC Chairman Gary Gensler, marked by lawsuits against giants like Coinbase and Binance, viewing most crypto assets as potential securities. However, the case will be adjudicated under the leadership of a new government and newly appointed SEC Chairman Paul Atkins, who has clearly indicated a more friendly stance toward cryptocurrencies and plans to establish clearer regulatory frameworks. Therefore, the outcome of this lawsuit not only concerns the fate of Pump.fun but will also serve as a barometer of how the U.S. judicial system balances two drastically different regulatory philosophies.
3. Signal Interruption: Lost After Being Banned by the Platform
If legal lawsuits are a fundamental challenge to its business model, then the bans on social media are a direct severing of its lifeline.
Digital Guillotine
Pump.fun's official X account and the personal account of its founder Alon Cohen have been suspended, which is not an isolated incident, but part of X's extensive cleanup operation targeting a series of Meme coin-related accounts (including GMGN, BullX, etc.). There are various theories about the reasons for the ban. The most credible explanation is that platforms like Pump.fun may have violated the rules by using shared or 'black market' APIs to drive their trading tracking and 'sniping' bots, which directly contravenes X's terms of service. Another possibility is that, faced with Pump.fun's increasing legal risks and fraud allegations, X opted to cut ties proactively to reduce its own platform liability.
This event profoundly reveals the centralized paradox of so-called 'decentralized finance'. Although Pump.fun is built on the decentralized Solana blockchain, its lifeblood—user acquisition, community interaction, and viral marketing—entirely relies on X, a centralized social platform. As a CEO who shared his experience on Reddit put it, losing an X account is akin to 'being silenced overnight'. This exposes a fatal weakness in the entire Web3 ecosystem: its social and distribution layers remain firmly controlled by a handful of tech giants.
Community Division and Narrative Shift
The platform's collapse triggered sharply different reactions within the community. Some took pleasure in the misfortune, believing Pump.fun was like a parasite that drained liquidity and attention from other valuable projects, and its downfall is 'a good thing'. Others speculators (the so-called 'Degens') lamented the loss of their beloved casino, saying 'there's nothing to play with anymore'. Meanwhile, more forward-looking voices began to call for a return to rationality in the market, redirecting focus to value building, and even directly urging capital to rotate back to the Ethereum ecosystem, 'Come back, my proud Ethereum Meme season!'.
4. Liquidity Black Hole and Public Chain Wars
The rise of Pump.fun not only created countless scams but also had a profound impact on the macro-ecosystem of the entire crypto market, especially intensifying the competition between the two major public chains, Solana and Ethereum.
The Massive Consumption of Liquidity
At one point, Pump.fun accounted for over 50% of new token issuance in the market, its model resembling a massive 'liquidity black hole'. It attracted vast amounts of capital and market attention into short-lived, high-risk speculative games, marginalizing projects that truly possessed practical value and long-term potential, continuously siphoning off funds. This phenomenon distorted the effective allocation of capital, rewarding marketing hype rather than technological innovation, posing a huge opportunity cost to the healthy development of the entire industry. When news broke that Pump.fun planned to conduct a $1 billion token financing, the market was alarmed, fearing this would further drain the already scarce liquidity of the ecosystem.
The Race Between Solana and Ethereum
The success of Pump.fun is a direct reflection of Solana's technological characteristics. Its trading processing capacity (TPS) of up to 65,000 per second and nearly negligible transaction fees provide a perfect soil for this high-frequency, low-cost speculative model. In contrast, Ethereum's high gas fees and slower speed make it difficult to replicate a similarly crazy 'casino'.
However, with the collapse of Pump.fun, once deemed a 'killer app' in the Solana ecosystem, a power vacuum has emerged. The community's call for an 'Ethereum Meme season' is not just an emotional venting, but could also presage a real capital migration. Speculators are always on the lookout for the next hot spot, and Ethereum, with its total locked value (TVL) of up to $64 billion, its liquidity moat, a more mature ecosystem, and a large user base, naturally becomes the most notable destination.
Conclusion: After the Carnival, a Mess
The story of Pump.fun is a microcosm of the entire Meme coin realm. It faces a lawsuit that challenges the very foundation of its business model, while also suffering from a social blockade that severs its marketing lifeline, falling into a double deadlock.
Its rise and fall encapsulate the core contradiction of the crypto world: on one hand, the utopian ideal of pursuing permissionless creation and ultimate freedom, and on the other, the rigid demands of real society for investor protection and market order. Will the collapse of Pump.fun serve as a necessary market cleansing, pushing capital back onto the track of 'value investment'? Or has that pure, gamified spirit of speculation taken root so deeply that it cannot be suppressed?
The casino lights have gone out, but the gamblers have not left. They are just looking around for the next place with neon lights. Over the wreckage of Pump.fun hangs a huge question mark, interrogating the future direction of the entire industry.
