The lawsuit was filed by Diego Aguilar, who claims the platform collaborated with influencers to facilitate pump-and-dump schemes that led to huge investor losses. Meanwhile, the Nelk Boys are also being sued over their $23 million MetaCard NFT project, and are facing allegations of false promises and misleading marketing. In China, a court sentenced BKEX executives for operating an illegal crypto gambling platform, and several employees are facing prison time for facilitating high-leverage trading.
Pump.fun Hit with Class Action Suit
Solana-based meme coin creation platform Pump.fun is facing a class-action lawsuit which alleges that every token launched on its platform constitutes an unregistered security. The suit was filed by Diego Aguilar in a New York federal court on Jan. 30, and claims that Pump.fun generated close to $500 million in fees from these token sales. The lawsuit also accuses the platform of employing aggressive marketing tactics to create artificial urgency, which led to major financial losses for retail investors.
According to the complaint, Pump.fun’s business model revolves around working with influencers to issue and promote unregistered securities. This effectively turns traditional Ponzi and pump-and-dump schemes into a new format.
The lawsuit names Alon Cohen, Dylan Kerler, and Noah Bernhard Hugo Tweedale, who are all listed as officers of Baton Corporation in UK Companies House records. Aguilar claims to have bought several meme coins from the platform, and is targeting all tokens on Pump.fun by branding them as “unregistered security meme coins.”
According to the filing, Pump.fun acted as both an issuer and statutory seller, which allowed it to maintain control over the tokens' infrastructure, liquidity, pricing, and promotion. The lawsuit seeks remedies including the rescission of all token purchases, financial compensation for any affected investors, and coverage of litigation costs. Pump.fun and Baton Corporation have not commented on the lawsuit yet.
This lawsuit was filed after an earlier warning from US law firm Burwick Law, which announced in mid-January that it was preparing legal action against Pump.fun over investor losses tied to alleged rug pulls and failed promises. The law firm also criticized the platform for hosting content involving illicit drug use, self-harm, racism, antisemitism, and other offensive material.
Pump.fun weekly volume (Source: Dune Analytics)
Despite the controversy, Pump.fun’s trading activity surged last week, and even reached an all-time high of $3.3 billion in weekly volume, driven by the launch of meme coins linked to the Trump family.
Nelk Boys Sued Over $23 Million NFT Project
Other companies are also finding themselves in legal trouble. A lawsuit was filed against the Nelk Boys, a group of YouTubers, accusing them of failing to deliver on promises tied to their non-fungible token (NFT) project, MetaCard, which raised $23 million.
The complaint was filed by Trenton Smith in a California federal court on Jan. 29, and it names Kyle Forgeard, John Shahidi, and their associated entertainment firms. The suit alleges that they misrepresented the project’s benefits and failed to fulfill their commitments. The suit even characterizes them as “snake-oil salesmen masquerading as entrepreneurs” who offered only minimal perks while neglecting the promised business ventures and investment opportunities.
MetaCard holders were allegedly promised exclusive benefits, including discounts on Nelk Boys-branded merchandise, access to events with celebrities like Snoop Dogg, and a $250,000 giveaway. However, the lawsuit claims that buyers ultimately received very little in return.
The MetaCard NFTs were minted in January of 2022, and sold out in minutes at $2,300 each, yet Smith argues they lacked intrinsic value beyond the promised perks. The lawsuit also pointed out that the current floor price of these NFTs on OpenSea is just 0.034 ETH, which is equivalent to just $111.
MetaCard NFT floor price over the past 3 months (Source: OpenSea)
Beyond merchandise discounts and events, the Nelk Boys allegedly promised holders opportunities to participate in their business ventures and access exclusive content. A spokesperson for Full Send, the Nelk Boys-affiliated clothing brand that was also named in the lawsuit, defended the project by stating that they organized multiple in-person events, provided early access to merchandise, and even offered MetaCard holders a chance to join their beef jerky business, Bored Jerky. They also claimed to have offered a widely publicized 30-day refund period, which was later extended for those who missed the deadline but started the application process.
Smith is asking for damages, restitution, disgorgement of funds generated through NFT sales, and attorney’s fees. The Nelk Boys have not responded to the allegations yet, and legal representation for the defendants is not publicly known.
This lawsuit is just one of many legal actions against NFT projects, including the cases against OpenSea in August and September last year. In these cases, the plaintiffs claimed the marketplace was selling unregistered securities.
BKEX Executives Sentenced in China
A Chinese court also recently ruled that crypto exchange BKEX engaged in illegal gambling through its contract trading platform, and sentenced several employees and agents to prison for their involvement. The People’s Court of Pingjiang County in Hunan Province determined on Jan. 29 that BKEX’s contract transactions constituted a form of online gambling, which implicated those involved in the crime of “opening a casino.”
The ruling found that BKEX allowed users to place bets using the stablecoin USDT while applying high leverage of up to 1,000x to speculate on Bitcoin, Ethereum, and other cryptocurrencies. The court classified these activities as illegal gambling under Chinese law, as they encouraged users to wager on financial outcomes.
BKEX was founded in 2018 by Ji Jiaming through Chengdu Dechen BiKe TianXia Technology, and repeatedly changed its corporate registration to evade regulatory scrutiny before ultimately dissolving. In 2021, Ji partnered with Lei Le to develop and promote the platform’s perpetual contract trading, which became a central feature of BKEX’s operations. By the time authorities intervened, BKEX attracted more than 270,000 users, including 60,000 active traders. The platform also generated more than 54.7 million USDT in profits.
Eight people faced criminal charges, with several receiving prison sentences. Zheng Lei, a former wallet engineer and department head, was convicted for providing technical support to the operation and was sentenced to two years and one month in prison, along with a fine of 150,000 yuan ($20,900). His earnings of 1.34 million yuan ($186,600) were also confiscated.
Wang, head of BKEX’s audit department, was responsible for KYC verification and processing transactions and was sentenced to one year and 11 months in prison with a fine of 52,000 yuan ($7,250). Dong was an agent who recruited users through QR codes and referral links, and earned $33,558 in commissions. He received a suspended sentence of one year and six months, along with a fine of 35,000 yuan ($4,880). Additionally, his earnings of 223,000 yuan ($31,000) were also confiscated.
The ruling is part of China’s broader crackdown on crypto-related activities, which the government views as a risk to financial stability. China has implemented multiple bans on crypto over the years, including banning banks from handling crypto transactions in 2013, outlawing ICOs and exchanges in 2017, and imposing a full-scale ban on trading and mining in 2021.
