A Solidus Labs report reveals that 98.7% of tokens on Solana’s Pump.Fun are linked to fraudulent activities, highlighting major risks in the crypto market. Most liquidity pools on Raydium also show signs of scams. Urgent calls for regulatory oversight and protection measures are being voiced by experts, as the legal landscape shifts regarding digital asset fraud.
A recent report from Solidus Labs has unveiled a troubling reality in Solana’s meme coin market. Approximately 98.7% of tokens on the decentralized exchange Pump.Fun are suspected to be involved in fraudulent activities, notably pump-and-dump schemes or rug pulls. This alarming statistic stresses the increasing risk for traders and prompts calls for regulatory oversight and intervention from law enforcement agencies.
The report highlights the prevalence of these scams, particularly on another significant Solana DEX, Raydium, where 93% of its liquidity pools are implicated in what’s called soft rug pulls. This occurs when creators withdraw liquidity suddenly, leading to drastic devaluation of tokens. Solana’s efficient transaction speeds and low fees, while attractive for trading, also enable such scams to unfold seamlessly.
Pump.Fun has experienced substantial trading activity, boasting an average daily volume exceeding $100 million. However, within the massive influx of tokens—over 7 million issued since early 2024—only 97,000 tokens still have liquidity exceeding $1,000. It appears that the bonding curve pricing model of Pump.Fun disproportionately benefits token creators, who can inflate prices through purchases while leaving latecomers with the risk of steep losses when token values plummet.
Analysis of 388,000 liquidity pools on Raydium indicates that about 361,000 display characteristics of these soft rug pulls, with median losses reported at $2,832, and some instances reaching as high as $1.9 million. Typically, these schemes begin with creators seeding funds in a pool, drawing in unsuspecting traders before draining the pool for profit—leaving victims with essentially worthless tokens.
Experts like Chen Arad, co-founder of Solidus Labs, have voiced that the scale of the fraud outlined in their findings necessitates stronger consumer protections. He likens meme coins to penny stocks in traditional finance markets, which also face significant fraud risks but can be somewhat mitigated through improved transparency and public awareness.
Arad encourages the use of monitoring solutions such as Token Sniffer, which is designed to help flag scams in real-time, particularly as oversight tightens. Recent actions by the Department of Justice show a clear shift towards prioritising prosecutions related to digital asset fraud, with proposals in some states like New York aiming to criminalise activities like rug pulls.
In light of these insights, a class action lawsuit has emerged against the Solana DEX Meteora, highlighting the context of a $69 million rug pull. Structural issues within platforms such as Pump.Fun are evident, with conflicts of interest inherent in the relationships between token issuers and trading platforms.
Solidus Labs puts forth that crypto institutions must adopt advanced monitoring tools to navigate these challenges effectively. The report asserts, “It’s no longer a question of if fraud will happen, but whether you’re equipped to detect and respond when it does.” This signifies the growing urgency for compliance solutions to safeguard trading environments, particularly in the evolving memecoin landscape on Solana.
