MEV Trading Resurfaces in Pump.fun Class-Action Lawsuit

A US court is reviewing new evidence in a class-action lawsuit against the memecoin platform Pump.fun and its partners. The case hinges on allegations of misleading retail investors and utilizing maximal extractable value (MEV) practices to gain an unfair advantage in trading new tokens.

Key Takeaways

A US court has permitted new evidence in a class-action lawsuit against Pump.fun and associated parties.
The lawsuit alleges that Pump.fun misled investors by falsely advertising memecoin launches while engaging in unfair MEV practices.
Over 5,000 internal chat logs were submitted as evidence in the case.
The outcome of the lawsuit could impact how MEV practices are regulated in the US.
A recent MEV bot trial ended in a mistrial due to jury deadlock, signaling the complexities of blockchain technology in legal contexts.

MEV trading returns to court in Pump.fun class-action lawsuit

Main Content

A US court is once again evaluating the practices of maximal extractable value (MEV) as a judge has authorized the inclusion of fresh evidence in a class-action lawsuit involving the memecoin platform Pump.fun. This lawsuit also names Jito Labs, a company involved in MEV infrastructure, the Solana Foundation, which oversees the Solana ecosystem, and several other parties.

The judge's ruling allows for the amendment of the lawsuit, which was initially filed in July. This amendment incorporates over 5,000 pieces of evidence, including internal chat logs provided by a "confidential informant" in September, which were previously unavailable.

Solana The first page of the motion to amend the case to include new evidence, which was granted. Source: Burwick Law

The lawsuit claims that Pump.fun intentionally misled retail investors by promoting their memecoin launches as "fair." However, it alleges that the platform conspired with Solana validators to use MEV strategies for front-running retail investors.

Maximal extractable value refers to a method of rearranging transactions within a blockchain block to optimize profits for MEV arbitrageurs and validators. According to the plaintiffs, Pump.fun exploited MEV techniques to provide insiders with preferential access to newly issued tokens at low prices, which were subsequently sold when prices increased, leaving retail investors with losses as they served as exit liquidity.

Attempts to reach Pump.fun, Jito Labs, and the Solana Foundation for comments through Burwick Law, the legal firm representing the plaintiffs, yielded no responses by the time of publication.

Solana The allegations in the original lawsuit filing. Source: Burwick Law

The outcome of this lawsuit could set a significant precedent for MEV-related cases in the United States as discussions about the ethical nature of these practices continue within the cryptocurrency sector, and regulatory bodies struggle to create clear guidelines concerning these complex issues.

Related: Pump.fun Co-Founder Denies $436M Cash Out, Claims It Was ‘Treasury Management’

MEV Bot Trial Leaves Questions Unanswered

In a separate case, brothers Anton and James Peraire-Bueno faced trial in November for allegedly profiting millions from using a MEV trading bot. Prosecutors contended that the brothers deceived victims into parting with their funds, while the defense argued they were simply employing a legitimate trading strategy without breaking any laws.

The jury experienced difficulty reaching a conclusion, with multiple jurors seeking additional clarity on the intricate technical details associated with blockchain technology. The trial ultimately resulted in a mistrial due to the jury's inability to agree on a verdict, emphasizing the challenges of resolving legal disputes that involve emerging financial technologies.

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