Pump.fun in Trouble? Lawsuit Raises Big Questions | Crypto Town Hall

Summary

Podcast Summary: The Wolf Of All Streets Episode: Pump.fun in Trouble? Lawsuit Raises Big Questions | Crypto Town Hall
Host: Scott Melker
Release Date: January 31, 2025

---

Introduction

In this engaging episode of The Wolf Of All Streets, host Scott Melker delves into the tumultuous developments surrounding Pump.fun, a prominent launch pad in the crypto space. Joined by his insightful panelists Carlo, Dan, JW, Dave, Gaurav, and Amateo, Scott navigates through the complexities of a recent class action lawsuit that has sent ripples through the cryptocurrency community.

Overview of the Pump.fun Lawsuit

The central focus of the discussion is a new class action lawsuit filed against Pump.fun. Carlo provides a succinct overview, highlighting that the lawsuit alleges Pump.fun facilitated the launch of unregistered securities through meme tokens, positioning the platform as liable under securities laws.

[01:29] Carlo: "Another class action lawsuit... broadly going after Pump Fun and making the allegation that the tokens that they facilitate the launching of are unregistered securities..."

Legal Analysis: Are Meme Coins Securities?

The panel grapples with the foundational question: Do meme coins constitute securities? Carlo mentions the Howey Test, a legal standard used to determine whether a transaction qualifies as an investment contract (and thus a security). He expresses skepticism about the lawsuit's viability, arguing that most meme tokens lack the necessary attributes to be classified as securities.

[03:25] Scott: "This class action then. Correct. This isn't like the SEC is going after Pump Fund like we've seen in the past with basically every crypto platform."

[04:54] Carlo: "They have to make a case that these meme coins are in fact investment contracts under the Howey test. That's going to be tough."

Comparison to Traditional Platforms

Drawing parallels to traditional platforms, Dan compares Pump.fun's situation to early internet platforms like Facebook, which were not held responsible for user scams.

[05:10] Dan: "It's very akin to the early days of the web 2, where people do scams on Facebook all the time. Doesn't mean Facebook's responsible for the scams."

This analogy underscores the debate over platform liability versus individual accountability in the crypto realm.

Market Implications and Manipulation Concerns

Gaurav and Dave introduce a provocative angle, suggesting that the lawsuit might be a strategic move by proprietary traders to manipulate the market. They theorize that such legal actions could serve as momentum ignition strategies, impacting liquidity and token prices.

[36:05] Dave: "The pump fun lawsuit is complete. What's actually happening is... prop traders convinced some plaintiffs and some lawyers to do this... move markets."

Carlo cautions about the ethical and legal repercussions if such manipulation were to be proven, emphasizing the damage it could inflict on both the legal profession and market integrity.

[39:35] Carlo: "Lawyers who sign lawsuits are certifying that they have a good faith basis... instigating a lawsuit just to pump markets... would end up disbarred and prosecuted for fraud."

Community Insights and Opinions

The panelists offer diverse perspectives on the lawsuit's potential outcomes and its broader impact on the crypto community:

• JW expresses skepticism about the lawsuit's strength and likens it to suing for unexpected negative outcomes from inherently risky investments.

  [09:31] JW: "But it's also an experiment in social connection... Communities build value and loyalty tokens. This silliness is part of a cool future."

• Dan criticizes the inconsistency of crypto enthusiasts seeking regulatory protection only after suffering losses, highlighting a fundamental disconnect between advocacy and practical responsibility.

  [34:48] Dan: "We've been discarding these rules. Life's tough. Get a helmet like, suck it up, buttercup."

Broader Regulatory Environment

The conversation shifts to the current state of crypto regulation, with Carlo and Dave debating the role of government intervention. They discuss the challenges of regulating decentralized platforms and the potential for new legal frameworks that balance innovation with investor protection.

[19:38] Dave: "Pump.fun is operating as an unregulated gambling or unregulated casino... Congress has no stomach for a completely unregulated marketplace."

Carlo contemplates the future of regulatory actions, suggesting that a change in political leadership could either exacerbate or alleviate current tensions.

[11:01] Carlo: "Trump is going to pump this economy... public sentiment is really not on the side of the Democrat Party."

Recent Crypto Events and Their Impact

Scott shifts the discussion to other notable crypto-related events, such as Michael Saylor's appearance on the Forbes cover and the continued scrutiny of high-profile figures like SBF, Do Kwon, and Elizabeth Holmes. The panel reflects on the symbolic significance of these developments and their implications for the industry's reputation.

[14:08] JW: "I have a love-hate relationship with Michael Saylor... He’s part of that toxic bitcoin maximalism world."

Closing Thoughts

As the episode nears its conclusion, the panelists offer final reflections on the lawsuit and its broader significance. Amateo predicts that the lawsuit will have minimal legal impact but acknowledges its potential to disrupt liquidity within the Solana ecosystem. The consensus leans towards viewing the lawsuit as a non-issue, labeling it a "nothing burger" in the grand scheme of crypto litigation.

[46:09] Scott: "I have a feeling that this is going to be a nothing burger completely."

Key Takeaways

1. Pump.fun Lawsuit: A class action lawsuit alleges that Pump.fun facilitated unregistered securities through meme coins. The panel remains skeptical about its legal viability.
2. Securities Classification: Determining whether meme coins are securities hinges on the Howey Test, with most panelists believing meme tokens do not meet the criteria.
3. Platform Responsibility: Comparisons to traditional platforms like Facebook highlight the ongoing debate over the extent of platform liability in decentralized environments.
4. Market Manipulation Risks: Concerns are raised about potential manipulation through strategic lawsuits, emphasizing the need for ethical legal practices.
5. Regulatory Challenges: The crypto industry faces complex regulatory hurdles, with differing opinions on the role of government intervention.
6. Industry Reputation: Recent events and high-profile figures continue to shape the public perception of the crypto space, balancing innovation with skepticism.

Notable Quotes

• Carlo:

  "[03:25] They are arguing that Pump Fun facilitated unregistered securities, but proving meme coins as securities is a stretch."

• Dan:

  "[05:10] It's like saying Facebook is responsible for user scams. Platforms shouldn't be held liable for individual actions."

• JW:

  "[09:31] Meme coins are experiments in social connection and community building, part of a larger, innovative future."

• Gaurav:

  "[36:05] This lawsuit might be a strategic move by prop traders to manipulate the market, impacting liquidity and token prices."

• Scott:

  "[46:09] I have a feeling that this is going to be a nothing burger completely."

Conclusion

Scott Melker wraps up the episode by reiterating the panel's collective stance that the Pump.fun lawsuit is unlikely to make significant legal waves. He emphasizes the resilience and adaptability of the crypto community in the face of such challenges, encouraging listeners to stay informed and engaged as the industry continues to evolve.

[48:32] Scott: "I think we covered basically everything today. We'll be back Monday... Have a great weekend. See you Monday. Bye."

---

This comprehensive summary captures the essence of the Pump.fun in Trouble? Lawsuit Raises Big Questions episode, offering listeners a thorough understanding of the discussions, viewpoints, and implications surrounding the lawsuit and its place within the broader crypto landscape.

Transcript

[Scott]

Morning, everybody. Happy Friday. This is Crypto town hall every weekday, 10:15am Eastern Standard Time. Today we're bringing up our crack legal squad to discuss the news about Pump Dot fund. Give some people a bit more time to get on stage. It's been quite a week in the crypto space. I did my Friday show with Nathaniel Whittemore, NLW. This morning on YouTube, we do the Friday 5 and review the biggest stories of the week. And it's pretty crazy how fast the crypto news cycle is moving. I mean, we've got obviously the Fed, Jerome Powell saying it's fine for banks to custody. Chris, crypto, I mean, passively, as if that's always been a thing. And we don't know about operation choke point 2.0. You know, we have Elizabeth Warren reemerging, screaming at Howard Lutnick about how tether is for outlaws and criminals and that Stablecoin should be eradicated effectively.

[Carlo]

It's.

[Scott]

We have SPF's parents fleeing for him to be released by Trump. I mean, just absolute crazy town. And of course, the Czech central bank actually moving forward to evaluate Bitcoin as a reserve asset. Think we got enough people in here now. Carlo, you wrote a great thread on Pump Fun. I would love for you to just give us the TLDR on what is happening there.

[Carlo]

Good morning, Scott. Man, do we ever get a break in this space?

[Scott]

No, but we love it.

[Carlo]

I'm on the move today. I'm on south beach, actually attending Ralph House Real Vision crypto gathering and actually just sat on a panel with Matt Hogan which was phenomenal. So amazing. I am, if, if, if I'm in a bad spot or it's noisy, I apologize. But yeah, pretty significant development. We've seen previous class action lawsuits. I think one was launched in response to the peanut token. And now this law firm has launched another class action lawsuit, broadly going after Pump Fun and making the allegation that the tokens that they facilitate the launching of are unregistered securities and that they, as the launch pad, are responsible. And it's a fascinating lawsuit. The most fascinating aspect about it is that the law firm actually launched their own meme coin on the platform as an illustrated exhibit of how easy it is to do so. They didn't fund it, but as soon as the lawsuit went down, of course, degens being degens, they all grabbed the contract address and started buying the token. And now we have this other dynamic going on. The token itself is seeing price activity and it was supposed to be a test case and an example of how this platform is being utilized by people and they don't have proper safeguards. So the first question obviously is can they get this class certified? Will they get to the point where this requires a response? And are mean tokens registered securities? I don't think so. I think it's a bridge too far.

[Scott]

This class action then. Correct. I mean, can you differentiate what this means? This isn't like the SEC is going after Pump Fund like we've seen in the past with basically every crypto platform.

[Carlo]

No, no. It's a class action brought by individual investor who is certifying on behalf of the class, arguing that they got burned on a few tokens that were launched over the meme coin cycle. Fred, remember the. The counterparty to the squirrel was Fred the Raccoon Fog, which is another. A very popular meme coin and one other meme coin that this investor apparently bought and lost on. And they are trying to make the argument, and I think it's a tough argument to make that Pump Fun has exposure here because they are essentially the launch pad for these. So the first step they've got to overcome here is they've got to make a case that these meme coins are in fact investment contracts under the Howey test. That's going to be tough. And then that they are a statutory seller that being pumped out fund under the securities act. And then based on that theory that gives liability to them. It's going to be hard to do that because they're going to have to demonstrate that Pump Fund was more than just a launch pad, a decentralized launch pad, but that they had an obligation to protect investors as well. So I'm curious to see how this is going to play out as well. But I think they have definite challenges ahead.

[Scott]

I mean, couldn't. Isn't there an in between. Right. Where these aren't deemed unregistered securities, but some of them are deemed pump and dumps and the person theoretically wins their suit without it having much impact on what these assets are.

[Carlo]

Yeah, but they want to go after the deep pockets, which is Pump Fun who gets a percentage of every meme coin launched. And we've seen the amount of wallet activity and the amount of Solana that's being extracted from the ecosystem and deposited into Pump Fund wallet. So unless you can make a case that Pump Functions has been a facilitator of this and actively assisting in these quote, pump and dump meme coins, it's going to be hard to recover damages against the individual mean coins because they're highly decentralized and they're commodities in my opinion. So that's why they're going after the low hanging fruit with the deep pockets.

[Scott]

That, that makes sense. Dan, have any thoughts on this?

[Dan]

Yeah, look, it's, it's, I think it's very akin to the early days of the web. 2. Whereas like you could people, people do scams on Facebook all the time. Doesn't mean Facebook's responsible for the scams. Right. A bunch of times people do scams on Facebook, on Twitter. It doesn't make the, the platform responsible for what happens on them. It is the people that are doing that. But he's right. Try and track down the guy that launched X, Y and Z token completely centralized, it's going to be impossible to find them.

[Carlo]

So in theory, and it does raise. Charlie, you're going after tech?

[Scott]

Yeah, go ahead.

[Carlo]

Yeah, yeah, you nailed it. I mean this is similar to the patterns we've seen where they're going after the tech that launches these things as opposed to the individual bad actors.

[Scott]

Right. I mean we've talked about this a lot with bitcoin, you know, used by bad actors. It's kind of like the argument that if you want to shut down bitcoin because people are using it for nefarious activities, you should, you know, go after Apple for allowing the iPhone to be used by drug dealers to make phone calls. Right.

[Carlo]

Exactly.

[Dan]

Or going after the Fed because the US dollar is used in drug trade. So I mean after the Fed because they issue US dollars, it's used to buy drugs. It's ridiculous. It's ridiculous.

[Scott]

Jw, I was just told that you're on stage. I only see Dan and Carlo up here. Can you hear because.

[JW]

Yeah, I'm here guys.

[Scott]

Oh, you're showing as a listener for me. And this happens all the time here. So. Okay, yeah, perfect.

[JW]

Cool.

[Scott]

I would love your thoughts. Awesome.

[JW]

Yeah, Carlo and Dan have hit it and I really appreciate Carlo's kind of exposition of this issue. Look, on this particular case, this one case, I don't see a lot of liability for pump that fund. I'm sorry, they have to go through the motions of get this, get this class action dismissed. But this is not get involved in sale of a security. When people have gotten closer to the line, it's usually because they're market making post launch. And I don't understand pump fund does any kind of post launch market making activity. So I don't see a lot of liability for them. But it is true that the next boss we've gotten rid of Gensler, we've gotten rid of, you know, SEC abuse for we've got four years where we're not going to see the SEC kind of trying to destroy crypto as a technology. But the next boss is class actions. Absolutely. And you know, I'm a believer in, in the cypherpunk ethos of the future of this technology is something meant to be extralegal, meant to be illegal, meant to exist in its own environment with its own rules. But that is sometimes hard to do. And so we have to continue to think about how to build in ways that don't end up putting the entire technology in some kind of class action abuse nightmare. And one of them is just build Anon. You know, build, build anon. Build Anon. Right. Anonymous building is hard to do if you're taking DC money. It's hard to do if you really your app to go in the Google Play store because you got to put your name to that stuff. But otherwise, if you can build anonymously, build anonymously. That's what I tell everybody.

[Scott]

Right. These individuals are not building. Right. I'm not talking about pumped up fund, but I'm talking about the individuals who are launching. And you know, we do know that people are pumping and dumping these things left and right. The whole point is that there's no utility and it's just a lottery ticket. Right. A collectible.

[JW]

Yeah. And it's. But I don't disagree with you. But it's also an experiment in social connection that generally that meme coins are an experiment in social connection. And this is the kind of silly antecedent to a future where I think we're going to see a lot of cool stuff where communities build value and build loyalty tokens and loyalty and access passes to things. So this silliness right now is still part of a cool future.

[Scott]

Yeah, I agree with that. So we also know that class action lawsuits in the United States are widely abused. Right. I mean anyone can sue anyone for anything. And the person who's defending it has to unfortunately go through the motions and spend the money with really no recourse and no upside at the end. So we've seen this over and over again in financial markets. Somebody loses money and they just look to sue some money.

[JW]

That is the world we live in. Yes, sir. And that's why I'm excited for kind of an illegal world, an extra legal world of building toward a code is law kind of future. But it's hard.

[Scott]

Yeah. I mean it's just a fundamentally broken system so, in the opinion of everybody basically up here, Pump Fund has very little to worry about. Maybe I can ask a better question. Would we have a lot. Would we have had a lot more to worry about if Trump had not won Carlo?

[Carlo]

Oh, absolutely. Because this would have certainly gotten the attention of the sec and it certainly would have. Potentially, just like they went after Coinbase and Kraken for being the intermediary centralized exchange where quote unquote, securities are being bought and sold, I can't see it would. It would not be a far stretch to try to make the same argument here. And look, Pump Doc Fund has extracted tons and fees out of a sector. And like you said, a lot of these meme coins go to zero. A lot of them are garbage. And I could see them targeting for purposes of protecting individual investors. But this takes away the discretion from people to buy what they want and transact and. And take those risks. And I think I may be presumptuous in saying this, but I think anyone who goes on Pumped On Fun and looks at the hundreds of thousands of tokens that are launched is assuming the risk. I mean, it is a casino.

[Scott]

Dave.

[Dave]

Well, speaking of that, look, the real question.

[Scott]

Dave, we can't hear you. Or at least I can't. Can you guys hear Dave? No.

[Dan]

No, I can't hear him.

[Dave]

What is it from a regulatory perspective?

[Scott]

Dave, you're breaking up. You have a bad signal. Gonna have to. What? Can you hear us, Dave? He's still talking. There's no idea. Dave, we can't hear you. You're just. You're talking and we hear every fifth word, so maybe you'll have to get somewhere with a better signal. Gaurav, you just jumped up on stage. I don't know if you've been listening, but you can tell me if not and we can move on. But if you have any thoughts on Pump Fun, this lawsuit. Love to hear your thoughts.

[Gaurav]

No, I. I literally just jumped in, so have no idea. I'll speak up. Also, juggling is within Satoshi Roundtable.

[Scott]

Sounds good. So I think we've largely. Dave, is your mic working? You can try. If not, we're going to move on to another topic. Yeah, I don't think the. The usual struggle of hosting people on the run on X. And yesterday, I think we actually just got completely rug pulled, which happens at least once a week as well, having nothing to do with anyone's connection. I want to talk about another thing. We got Michael Saylor on the Forbes front cover, which seems really, really exciting. But SBF and do Kwon and Elizabeth Holmes and basically everybody who's been featured on the COVID of Forbes sitting in jail. I'm not implied that Michael Saylor would go to jail by any stretch, but it's been laughably as a sort of a meme, a historical sort of top signal for the industry. Anybody care that Michael Saylor's on the COVID of Forbes? Does it worry you?

[JW]

I, I have kind of a love hate relationship with Michael Saylor. That, that is to say he doesn't know who I am, but my own view of him is kind of love hate. I love the fact that on the one hand he was right about Apple, he was right about bitcoin, and when he's right, he places a bet. He does what we should all try to do in life is, you know, wait, study, sit, listen, and then when you have one just committed bet, go all in. Right. So I respect the game, I respect that. On the other hand, you know, toxic bitcoin maximalism, he's part of that world, very much a toxic bitcoin maxi. Some of the original people involved in the development of bitcoin are not as maximalist as he is. Why do I need to buy MicroStrategy when what I should be doing is buying bitcoin and self custodying it myself? That's the whole point of bitcoin. I think if Satoshi were here today, he or they probably, they would say it's ridiculous and silly to own bitcoin by buying a share in a public company that owns bitcoin. That's the dumbest thing I've ever seen in my life. I don't have a problem with him being on the COVID I don't have a problem with him being in our community, being an advocate for this space. That's great. I mean to fight fights for crypto you got to ally with people who are a little crazy. But I'm not 100% a fan love hate relationship there.

[Dan]

And yeah, so the best thing that I know about Sailor is he was anti bitcoin before. So people say, you know, bitcoin is not an IQ test, it's an ego test. So he, he came out against bitcoin. You know, there's this famous tweet about him saying, oh, it's like a gambling or whatever. He was wrong and he came out, he, he ate the humble piece and he said, yeah, no, I was wrong and it's good. And it takes a very brave person. In this day and age when people are sharing tweets left, right, and center to say, yeah, I got it wrong. This is now the right way. And so I have a lot of respect for him for coming out against his previous judgment and eating the humble pie and saying, yeah, no, bitcoin is the right way. Because previously he was anti bitcoin and now he's pro it.

[Scott]

So that's been the path of quite all these guys, right? I mean, all these strong opinions, loosely held, everybody's dismissive, they do the work and then they come around.

[Dan]

I agree. So when I first heard about bitcoin, I was anti bitcoin. I was like, oh, it's a scam. And it took me a while and then I ate my own humble pie. And I was like, yeah, I put a blog out on my blog saying I got it wrong, right? But the fragility of openness, of saying, yeah, I was wrong, admitting you are wrong is a superpower. It really is a superpower. If you want to go look at on Reddit, rbuck coin, there's a bunch of losers there that have been anti bitcoin since it was like a dollar. And they're. They're like the Japanese soldiers in the Philippine forest, right? Ten years after the war's over, still saying bitcoin's a scam, guys, the war's over. Right. Don't worry. You know, it's ridiculous, right? They're still there doing that kind of stuff. Have the humility to admit if you got something wrong. Because as soon as you admit you are wrong and you go, right, I was wrong. And this is the way. It's such a green and pleasant land when you have the humility to admit that you're wrong about something. And he did. So I've got a respect for him for doing that.

[Scott]

You know who hasn't admitted the wrong? Elizabeth Warren was going absolutely apeshit on Howard Lutnick about tether being for, quote unquote, outlaws and used by North Koreans and terrorists and smugglers and such. She's not coming around in the manner that you're talking about, Dan.

[Dan]

Okay. Keep fighting the war. That's way over, right? You're the Japanese soldier in the Philippine forests in 1974.

[JW]

Cool.

[Dan]

Be that. Good luck to you.

[Scott]

Yeah. But I will say I was on a spaces yesterday with John Deaton in the afternoon, and he did make the point, which I've kind of been alluding to before. When you have one party sweep the House Senate, obviously the presidency, very rarely do they survive the midterms without one of those flipping. Obviously a viable chance that The Democrats could take back the Senate in two years. I know people don't want to hear that. That's a possibility. If that happened, by the way, Elizabeth Warren would be the chair of the Senate Financial Committee again. So maybe in her mind, she sees it as a war worth continuing to fight if they can flip back the Senate. Go ahead, Carla.

[Carlo]

I see that as a possibility. However, I think Trump's hedge against that is going to be that he is going to do everything he can to pump this economy in the next two years, and that's going to include devaluing the dollar and bringing as much innovation as he can into this country as a hedge against losing those midterms. I think that is something that's been baked into their transition plan from day one, and I think they are ready for that. And frankly, I just think that public sentiment right now is really, really not on the side of the Democrat Party. So they're going to have a challenge in accomplishing flipping those seats.

[Scott]

Agree. But, you know, the economy goes to crap or something in the next two years or we see a recession or a dip, which we know are outlawed by governments now. You know, there are things that could happen in the next two years that could change that sentiment, I would imagine. You know, nothing, nothing's guaranteed. Dave, is your mic working? Want to try getting in here?

[Dave]

Is it? You tell me.

[Scott]

Yeah, you're not breaking up yet? Go ahead. Yeah, that's good.

[Dave]

Oh, okay. Yeah, yeah, I'm in the supermarket.

[G]

Sorry, guys.

[Dave]

Having a barbecue at my condo today. Tonight. You know, I had two points to make. One on the pump.com because, you know, it really boils down to the Trump agenda and the transition plan. People have to remember that the whole reason this class action says it's a.

[G]

Security is because it's a crutch.

[Dave]

Because securities laws essentially outlaw everything. And the reason these things are meme coins in the first place is because they're not securities, because they don't have any economic rights. But if you read, you know, what Paul Atkins has said and what a lot of people in this administration, you know, have dissent, have said, I think that, that, that, that false distinction, which I've been railing about effectively for four years is going to go away. And so, yeah, right now, I think that case is kind of bullshit. But, you know, the fact is Pumpkin Fund is operating as an unregulated gambling or unregulated casino. I mean, casinos have casino consult commissions, lotteries are supervised, etc. I don't think that the, that our Congress, if they really thought about it, has any stomach for a completely unregulated marketplace. So there's going need to be something. Now, I don't know if they've done anything wrong, and it could very well be they've done everything right and they have nothing to fear. But the real class action would be if, in fact, Pump is advantaging certain users over others, not disclosing the methodologies. You know, someone argues that it doesn't disclose risks, although I've seen them, I think their disclosures of risks are pretty good.

[G]

That's really the issue.

[Dave]

And, you know, it's kind of bullshit when we always have these things happen where the, these suits happen based upon technicalities rather than based upon what the real stuff is. So that was my thought there, and, and I hope that that makes sense. That makes sense to you?

[Scott]

Yeah, it makes perfect sense. Go ahead, go ahead. Okay.

[JW]

Now can I offer thought? Your thought makes perfect sense to me, but it is also true that there's no difference between Pump Fun and a baseball court store or a coin collector store, other than the difference of because it's crypto, it's able to be bigger, faster, a ton more money has flown into it. So it is just a coin collector store or baseball card store, plus the fact that, you know, a ton more money has gone that way.

[Scott]

So it's.

[JW]

I think that it still is.

[Scott]

Yeah, sorry, go ahead.

[JW]

Yeah.

[Scott]

Go ahead.

[JW]

I'm finished.

[Scott]

I think that's fundamentally true. But like in this baseball card store, they can take your money and then rip your baseball card in half before they hand it back to you.

[Dave]

Yeah, fundamentally, you're correct. The point that I was trying to make here, but. Well, fundamentally, that's true about all crypto. Right. Crypto are liquid commodities in most cases, and some of them will be securities. And frankly, it should be. There shouldn't be any damn difference between the way we regulate liquid commodities or basically, liquid assets can all be regulated in a similar way, but the only real differentiation being the nature of the issuer. But because, you know, manipulation concerns are exactly the same. Fair and orderly markets are exactly the same. And now we finally have leadership in Washington who actually understands that. Now, whether it will happen, whether we'll get the legislation, whether we'll get things to work, I don't know. And that's something that. It's a longer, deeper conversation. But what does matter is what are the real principles of protection we're trying to maximize here? Now, I participated in class actions. I, I generally the good ones have.

[G]

Real harm and real cause.

[Dave]

I haven't looked at this one. I have no idea if there is.

[G]

So we'll just, we'll just leave it as that.

[Dave]

I want to make a comment about Michael Sailor because while I, I personally am sympathetic to the notion that real bitcoiners will keep Bitcoin in cold custody and either you don't need for microstrategy, that statement is so overwhelmingly naive that I actually have to laugh at it. And the reason it's overwhelmingly naive is because there are, I mean, the vast majority of the participants in the world's financial system don't understand the technology and have their money locked into brokerage accounts and accounts that literally are trapped there to only be in certain assets. And so MicroStrategy bringing, you know, these, this, the reason this preferred is so, and I don't know if you commented on. Scott, the fact that it's massively over. Shows you. Yeah, it shows you massive corporate demand from people who don't want to fight the fight. So if you're a corporate treasurer, if you're an asset owner and you want to, and you want to be invested in Bitcoin, you have a choice. Do I buy an instrument that my rules that are written for me say I can buy or do I want to fight to change the rules? Well, and, and, and if you're, if you're a real zealot, then you'll try to do both. But the fact is, is what we just learned yesterday is that there's still enormous demand from people who have rules that say that they want to be able to buy Bitcoin, they want to be able to use products that they understand that they have rules written for where they can. The risks make sense. And the bitcoin community continues to ignore that until there's such a time as you can buy bitcoin, custody it with a third party where you know that barring a, you know, like nuclear war, you're getting your money back no matter what happens to them because you're going to win in bankruptcy and it's going to be the bitcoin, it's not going to be the cash equivalent like those of us who lost money in FTX are getting cash like any day now. You know, until that happens, people are going to be looking for alternative. And it's, it's just that why go.

[JW]

With MicroStrategy when you could just do Bitcoin ETF? There's a ton of them. They're super cheap.

[Dave]

Well, the answer is you want, you want to know the answer. The answer is people like leverage and in the case of the preferreds, people like also Dave. And they like different risk.

[Scott]

Sorry.

[Dave]

And the preferred, I mean, Jeff Clark did. Yeah, sorry, I was just going to plug you, Scott. So let me plug you. Jeff park did a really good job on Scott's podcast earlier this week explaining.

[G]

Why to look at the preferred specifically.

[Dave]

And I think it's worth a listen.

[Scott]

No, no, I was effectively going to say that. And also JW, interestingly, I agree with you 100% but I think MicroStrategy was a proxy for the ETF. Then the ETFs were launched and people said why would you buy MicroStrategy? To get exposure to bitcoin fairly. And so he started doing these convertible notes which similar to how MicroStrategy gave people who couldn't buy Bitcoin an option to buy Bitcoin. Having these convertible notes gave a different sort of wall of money and investor the opportunity to get exposure to Bitcoin who maybe couldn't. Like an insurance company can't buy maybe an individual stock and certainly can't buy bitcoin in self custody, but they can buy that convertible note and get their exposure that way. Right. So I think he's just finding novel ways for new money to gain exposure. And the prep is just another way to raise money, buy more Bitcoin. And to your point, Dave, I mean it's like double over subscribed. I think they were targeting 250 or something. It's at like 5, 45, 60. I mean that bottom line, there's a ton of demand for all this. Go off, go. I did not hear gov. So we'll try with Amateo. So Gaurav tries Jeff on stage. Amateo, go ahead.

[Amateo]

Hey Scott. Yeah, just kind of going back to the topic at hand here. I think that this case is a big nothing burger. If you look at the plaintiffs, they're really targeting three tokens. Primarily. One of the co plaintiffs is named in another lawsuit and they're claiming a total loss of 200. So if you've been only wrecked for $231 messing around on pump fun, then you came out relatively unscathed and probably did pretty good compared to everybody else. So I think when you look at like he's actually bringing this lawsuit, it's just some disgruntled people that didn't know what they were doing. I don't think that's going to set any kind of legal precedent. And obviously as some of the more Legal experts here demonstrated there's a lot to prove in order to verify and validate this lawsuit. But I would say that maybe more importantly, this spooked a lot of liquidity out of the Solana ecosystem. You could sort of see that as bitcoin dominance is trending a little bit down, there's a bounce in oversold alts kind of across the board. But you're just not seeing the same environment on Solana. And that might have been on a higher note what this ecosystem need to sort of return to the norm and have a little bit more of what we've been talking about here in spaces as a flight to utility. When it comes to, like, how they're going to actually manage pump fun in the future. I think there was probably a clearer road path to be able to do this until Trump launched his own meme coin. When you've got that with 80% of the supply locked up, I actually think it really complicated implicates how they're going to approach these things when you've got the President of the United States who's got a kind of hybrid asset that you're not able to really label or name very clearly as a commodity, as a. As a security, as a meme coin. So I think it just really muddies the water here when we start to look at legal precedents. And I'm sure that's going to leave quite a bit of head scratching when they start to actually iron this out and decide how they're going to approach this. I do think that we'll probably see something in the future regarding Pumped up fund, but I just don't think this is it.

[Scott]

Yeah, it's a degree. Gorav, is your mic working?

[Gaurav]

Yeah. Is it? You tell me.

[Scott]

Yeah, you're good, you're good.

[Gaurav]

Okay. Okay. So I'll go back to, I think just cards and, you know, fan cards and coin collector shops. It isn't.

[Scott]

You cut out the bad signal now you're good. Welcome to X. Gotcha. And people.

[Gaurav]

So, yeah, I'm saying it's. When I'm going back to the same point where somebody said it's the same coin collector shop, it's the same cards. You know, the regulation or the regulated activity differs from unregulated activity. Only most of the times on the question of scale, it's like saying, oh, it's the same car that drives, you know, 150. Sorry, same car that drives a 350 on the track. Why can't I drive it 350 on the. On the city roads. Right. That's where regulations kick in. So with a kind of liquidity access approach, easiness, you know, crypto comes into the picture and smashes the question of liquidity. It has to be regulated and. Exactly. That's how if you see KYC and money compliances are structured, you know, in a lot of nations, especially in Europe, you can do a lot of stuff up until $10,000, you know, maybe even without KYC. And then you got to give the basic level of KYC and then you promote it to whatever. I mean, once you're approaching a million, then you've got to show your proof of funds and source of funds and so on and so forth. So that's regulation about. So simply the mere argument of saying it is the same coin collector shop. I don't think it qualifies the range and span of what Pump Fun is doing. And I think it needs to be checked. And I need it. Of course, it's a big dent on the industry. The kind of liquidity loss and the kind of reputation loss these activities bring. Now I, of course, I'm here in Satoshi Roundtable and it is a bunch of anarchists talking about, you know, how the world should be unregulated and should be wild. Well, I'm sure anyone who's left into that wild would, would want the same centralized police and the same centralized systems to, to kick in and save them in different forms and factors. And as soon as they realize that it applies in one shape and form, they would probably agree that it would require the same kind of implications or applications of control and centralization in different forms. What I mean is, let's say police is meant to save you the centralized system. Similarly, the regulators are also meant to save you. Now I'll park that. There is the same thing like saying, oh, you should be actually simply posting transactions on Bitcoin and not actually using Lightning Network or anything that's built on the top to facilitate an older technology. Almost philosophically the same thing as saying let's use the wheels made of stone, because that was the original invention. Anything that is facilitating, can you. You're saying something, Scott?

[Scott]

No, I just giggled.

[Gaurav]

Yeah, okay, your giggle was, was sort of filtered by your AirPods or your mic, so, so that's the same thing. I think Michael Saylor has, has found a genius model of finding trust, you know, spanning into the custody problems or let's say the custody complexities of blockchain. It's also easing the, easing out the access to bitcoin. And, you know, who knows a lot with Ms. Starting stock and might eventually get into bitcoin having their own private keys and.

[Scott]

Hey, buddy, you're breaking up quite a bit. Go to Dan. Sorry, Garav. You keep breaking up now, Dan, go ahead.

[Dan]

Yeah, so, like, for the last 10 years or more, the entire apparatus of the American government have said, do not touch crypto. And they've gone out of their way to wage lawfare against all of the. Everything that we're doing. And then you get rugged for one soul on Palm Fun. And then you immediately go crying to the government to try and save you. Life's tough. Get a helmet like, suck it up, buttercup. Like, you can't be on the vanguard of this new financial industry where we're dismissing regulators and saying, yeah, we don't need all X, Y and Z. And then as soon as you get rugged for a tiny bit of money, come. Come crying to Uncle Sam to save you. You know, these are the rules that we. No, we're. We've been discarding these rules. You know, I was at binance when getting sued by the government's left, right and center. We hold at the vanguard of, as I said, the vanguard of this new thing, thumbing our noses at government and regulation. And then when you get rugged for, you know, half a soul, you won't go crying to regulators, save you. You know, the rules. Like, again, I wonder, you know, to.

[Scott]

Some degree, I 100% agree with that, by the way, but to some degree, it reminds you, though, that all the people using these things are not crypto natives. Right.

[Dan]

The people that are complaining now are not native. Yeah, I get it.

[G]

Yeah.

[Scott]

So I think you have to remember that retail does come in and this is maybe their first taste of what we're doing over here. And they don't realize they're in a casino. It's like, you know, walking into. You don't realize you're walking into a casino and you start gambling and then you're mad, Right? Oh, this is a casino. I have no idea.

[Dan]

Welcome to the show. Take a seat. You know.

[Carlo]

Yeah.

[Scott]

But it does. Does remind us, though, that there is some responsibility for the industry. And I. Nothing gets pumped up on here, though, you know, to kind of represent the industry well to new retail that enters. But listen, you know, we had NBA top shot. I have no idea what like NFT video of the ninth man on the Denver Nuggets doing a dunk from three years ago is worth now, but I have a feeling it's way down. You Know, and a classic meme where.

[Dan]

The guy's getting hanged and he's like, is it your first time? You know that meme was like a first time. Right, right.

[Scott]

But we've had a lot of ways for people to creatively lose money when they get into our space for the first time.

[Dan]

Welcome to the show. You know, take a seat.

[Scott]

Yeah, yeah.

[Dave]

Can I make a contrary point here.

[G]

Scott, and tie some of these things together?

[Dave]

So, so let's just, let's just go.

[G]

Down the rabbit hole and say that this, this pump fund lawsuit is complete. And what's actually happening is a couple of prop traders convinced some plaintiffs and some lawyers to do this. They knew that this was going to happen as they put on a short Solana buy other shit trade because they thought liquidity would flee the looks. Look Solana ecosystem. Or in fact they just bet on Defi that liquidity is going to flee the Solana ecosystem. How do the people in the Solana ecosystem feel about the inside information of a misused lawsuit? The same thing in any other traditional liquid asset would be considered insider trading or market manipulation population and those people would end up paying fines or going to jail. Is that better or worse? It's a really interesting question. I personally think it's probably better. I'd say the same thing about momentum ignition strategies. When people build a hedge position in futures and spot and then dump the shit out of the less liquid spot to make more money on the futures. Look, I know human beings who did that in Japanese equities and futures in the early 90s before the Japanese authorities started cracking down on it. I mean I know them. I mean they were at companies that I worked at and companies people that I knew and they made lots and lots of money. But the market itself didn't develop and didn't bottom out and didn't stabilize until people realized that that shit was going to get stopped. So if you really want an asset class to mature, there are certain behaviors that we have decided collectively are not part of fair and orderly markets and we don't want them them. And I don't think there's a whole lot of people who are advocating that market manipulation is a good thing. But that's why the welcome to the show sort of comment to me is problematic. I mean, yeah, look, I understand it and, and they're on the edges. I think that most traditional markets are over regulated to the point of making them less efficient and exclusive to people and all sorts of really bad things. But there is a line upon which I believe And I think most people in financial markets believe that if you want to attract mass adoption, you need to have. And so that's really the point. And look, I don't know, but if it's actually true that this was over $231, this strikes me as highly likely to been a market manipulation event. And I don't know that we'll ever prove it or know about it, but that's the sort of thing that I kind of wish that it was explicitly illegal. And people would know that an attorney who files a suit pursuant to this, if they had any knowledge of why it gets disbarred, I mean, that would stop it immediately. So I'm curious what people think about that. I know it's a controversial statement.

[Scott]

Well, we have some lawyers here who wouldn't want to be disbarred. Carlo, what do you think of that? Controversial, controversial state?

[Carlo]

You know, I need, I need him to kind of give a little more context on that, because I'm, I kind of got lost in that one. Dave, I apologize. Can you repeat that analysis? Yeah.

[G]

Let's say the sake of argument that lawyers take at the request of proprietary traders, a frivolous lawsuit that will be headline making, that will move markets, but not have any particular veracity beyond that. And the traders make a fortune based on the way the markets move after the announcement of the lawsuit, close it up. And then the lawyers ultimately end up dropping the suit sometime later because they only did it because they were getting paid, taking a kickback from the traders who were making money based upon the fact that the news of the lawsuit would move markets.

[Carlo]

Oh, yeah, that would be very bad because lawyers who sign lawsuits are certifying that they have a good faith basis even though they have a client who's countercertifying, just like in this class action lawsuit, if you're going into that with that sort of fraudulent intent from the start, you, you are clearly not only jeopardizing your law license, but also potentially opening yourself up to a fraud prosecution. So I think that would be bad on many levels to instigate a lawsuit just to pump markets and then dump based on the, on the news of the lawsuit in order to enrich your clients. And indirectly you is. Is bad on so many levels that, I mean, I know we see a lot of debauchery in this space, but that would be a new low.

[Dave]

Yeah, I agree it would be.

[G]

But the point that I'm making, Carlo, is without some surveillance of the market and what the hell's going on and Making it clear it's entirely possible. And, you know, because when you see frivolous lawsuits that move markets, you. My brain. Look, I know. I mean, Rick Ketchum, who used to run finra, once told me that I have the soul of a thief with. I have the thought processes of the thief, but I have a soul. So I tend not to steal. You know, he thought I'd make a great regulator as a result. But, you know, I see opportunity every time I see something that moves markets, and I am hardly alone. There are tens of thousands of people who are smart and look and understand what can move markets and, and you.

[Dave]

Know, we, we kind of like shrug.

[G]

This stuff off, but it's, you know, when you look at the dark underside of all financial markets, you need to understand what the implications are. And then, and that's where regulators should be doing. The fact that we had four years of, of an absolute douchebag who somehow miraculously gets hired by MIT to continue to, you know, to take douchebag pedagogy to a new level. You know, it was, to be fair.

[Scott]

It was, it was the breeding ground of his douchebaggery. He's going full circle.

[G]

Well, I mean, maybe, but he didn't say those things when he was there the first time. Look, my point is, is he, he specifically encouraged this sort of, you know, for four years and went after good actors. But, you know, regulation in the sense of principles based regulation can do a lot of good. Regulation in this case of prescriptive, you know, lobbyist written, you know, regulations that effectively prioritize winners and losers, well, that tends to create lots of bad stuff. So, you know, I'm just pointing out in this case that something that's completely horrible should be clearly illegal and people should understand, understand it. And lawyers should know to think twice before they take a case because the more logical, the more likely scenario, Carlo, is that the lawyers didn't know.

[Carlo]

Exactly. I was just thinking that unwitting lawyer who doesn't understand or can't see. And that's where, again, like you said, Dave, strategy plays into this. You know, I've been doing criminal defense work for 30 years, so I've made a career out of representing people that use poor judgment and always have to anticipate and look for potential issues just like that. Are you being played as the lawyer? Are you being used as an instrumentality to perpetuate fraud? If you're acting in good faith based on client representations and you have no other reason to believe so the one canon that does protect you in the ethics code is that lawyers cannot speculate. They have to have concrete evidence of that. They can't speculate on the intentions because if they make ethical choices and decisions to advocate zealously for a client based on what they speculate is going on, well then they're doing a disservice to the client without concrete evidence, if the client overtly admits to it, that's a totally different story. Lawyer has to withdraw, probably disclose to the court, and it opens up a whole Pandora's box.

[G]

Right, so. So my point here, which I think you and I are going to be, I figured we'd be on the exact same page, is that if you were prop traders and you want to manipulate the market, you find a bunch of plaintiffs to say, hey, go get the, you know, go get your lawyers to do this. Convince them that, you know, if you, if they start this, that a million other people will join in and they'll have this huge class action. And people, there are a lot of lawyers who are willing to try that and position themselves entirely, wait for the announcement, know when the announcement's going to happen and trade it. And to me, I don't think there's a. I'd be surprised if anyone on this panel thinks that that's something that is a good thing and that it wouldn't be a good thing for to have some light touch regulation that makes it very, very clear to all the lawyers in the space that this sort of shit's illegal.

[Scott]

Yeah. Amateo then. Dan?

[Amateo]

Yeah, I just wanted to clarify something, Dave. So the co plaintiff has another lawsuit where the 231 is mentioned. There's no disclosure of how much the actual losses are from the primary plaintiff, but it's not an extensive class action lawsuit. Clearly they're probably trying to recruit people to pile on, but. But that's not really clear. I think that the unspoken thing here is that you've got like this dopaminergic absolute insanity in pump.fud and what's happening on Solana. And even if Pump Fun got regulated or banned, you're going to see copycats because what they've achieved and what they set out to do isn't that complicated. From a technology perspective. It's only getting easier and easier with automated, no code deployments of AI agents being able to create tokens, list them, do liquidity management. All this stuff is about to be a magnitude and a factor of 10 even more simplified and automated. So. And I think that this is going to be a basketball underwater situation, because these people are so addicted to these quick gains. They love getting rugged. I don't know why, but they clearly do. And they're going to find a way to participate in this degenerate behavior, no matter where it occurs. And for each one that goes down, 10 more are going to pop up. It may not be as consolidated in liquidity, but I think that's just the reality of it.

[Scott]

B.

[Dan]

You know, I think this whole lawsuit can be described as a bunch of people bought tickets to the lions eating people's faces show, and now they're suing because a lion ate their face. Right. It's. That's specifically as it can be like, you know, I never thought they'd eat my face. It's. It's a. The leopards eating people's face show. And you went there and you got your face eaten by lion. Yeah, that's what it is.

[Scott]

Welcome to the show. Yeah, it's insane. And we'll see if a lot of people pile on to the class action or not. I have a feeling that this is going to be a nothing burger completely. Like I said at the very beginning, Carlo, if this was like some sort of government action like we've seen in the past, it would be worth. Worth taking a look at. But class actions, I mean, come and go by the thousands every single day. It's just. Yeah, Mateo.

[JW]

Yeah. I want to speak to some regulatory observations that are kind of made along the way. So I'll take the uber libertarian position. That's always the one I tend to take on panels. You know, there's a subset within crypto now, post election, that's the kind of regulate me daddy group in crypto that wants to see not just regulatory accommodation, exemptive relief, but this group also tends to be big believers in the idea of a great bipartisan law. Let me tell you something right now, Congress is going to be the ultimate rug pull on crypto legislation. Look, Stand with crypto rates 58 senators as pro crypto, which is great. They've done a lot of work to get to 58. But guess what? We need to get legislation through the Senate 60. That means crypto legislation will need two anti crypto Democrats to vote for that legislation. What it would take for them to vote for it would be so ugly that I don't want that bill to pass. I don't want a crypto bill to pass with two anti crypto Democrats voting for it. Whatever it costs to get that is going to be horrible. And, and I don't want to see it pass. I'm going to light that thing on fire. I'll tell you right now. I love the memes from. From Dan. I think you've captured it. And I also think it's incredibly bullish that the Trump family is all in on crypto. I don't care. That there's an 80% overhang and they're keeping. I don't care. I don't care. Incredibly bullish signal. The Trump family is all in. The SEC has the pin for exemptive relief. The SEC's power to give exemptive relief is unfettered. It is what you might call plenary power to give exemptive relief. I'm looking for a full exemption for defi, period. I want a legal defi. I want the future that Nick Sabo and Vitalik and Timothy May had in mind. KYC is not kyc. Defi is not defi, period. I'm all in for. For a future where we don't need roads.

[Scott]

That's gonna be why I like the, like, the back to the future reference. I think we would all theoretically be in for that. But understand that that's a. If we're looking for regulators and legislators to be on board with that, that's gonna take a hell of a lot of time. But, hey, you might as well aim for the pie in the sky. Guys. I think we covered basically everything today. We'll be back Monday, 10:15aM Eastern Standard Time for another crypto town hall. Everybody, give our amazing panel a follow. They're all here because we like them so much. And everyone else, see you after the weekend. Have a great weekend. See you Monday. Bye.