Executive Summary

Recent regulatory clarity has created a pathway for crypto institutions to confidently list and engage with memecoins, unlocking significant new opportunities alongside inherent risks. Memecoins have consistently demonstrated their central role in crypto culture, providing participants a unique blend of community-driven engagement and speculative potential with lottery-like returns. On February 27, 2025, the US SEC’s Division of Corporate Finance issued a staff statement stating that while volatile and risky, memecoins do not involve offering and selling securities under federal securities laws. As regulators refine guidelines, the crypto market evolves toward a spectrum of clearly defined financial activities, granting memecoins a recognized and increasingly legitimate position within this broader landscape. 

​​With its low fees and user-friendly decentralized exchanges, Solana has emerged as a leading platform for memecoin speculation. Our comprehensive research reveals the alarming scale of fraudulent activities on Solana: approximately 98.7% of tokens on Pump.fun and 93% of liquidity pools on Raydium have exhibited characteristics of pump-and-dump schemes or rug pulls. 

Unchecked, these fraudulent activities pose serious risks, not just financial loss to traders but significant regulatory and reputational threats to crypto institutions facilitating memecoin trading. This report comprehensively analyzes memecoin trading risks within Solana’s leading decentralized exchanges - Pump.fun and Raydium. By quantifying the prevalence of pump-and-dump schemes and rug pulls, our research highlights critical risks in Solana's memecoin ecosystem, emphasizing the necessity for diligent consumer protection controls. The findings underscore why crypto institutions must proactively implement advanced monitoring tools to safeguard their platforms and users from pervasive fraud.

The Rise of Memecoins

Memecoins have transformed from niche phenomena to mainstream speculative assets. High-profile endorsements, including a controversial launch by the president of the United States and his wife days before the inauguration, and the explicit regulatory clarifications from the SEC categorizing memecoins closer to collectibles than securities, underscore their growing acceptance, all against an economic backdrop where speculative activity is on the rise. 

However, this rise comes with substantial volatility and vulnerability to fraud, particularly through pump-and-dump schemes and rug pulls. Crypto institutions face a pressing challenge: How can they safely enable their customers to participate in memecoin trading without exposure to significant financial harm?

Solana’s Memecoin Ecosystem: Ground Zero for Fraudulent Activity 

Solana’s uniquely low fees (often fractions of a cent per transaction) and rapid transaction finality (under 1 second) make it particularly attractive for memecoin trading and scammers looking to deploy and execute fraudulent schemes quickly. Platforms like Pump.fun and Raydium have attracted massive trading volumes, but our recent research highlights the significant dangers lurking under the surface. 

Pump-and-dumps on Pump.fun

Pump.fun, a popular Solana decentralized exchange (DEX), boasts an average daily volume exceeding $100 million, primarily driven by speculative memecoins. We analyzed the performance of tokens created on Pump.fun between January 2024 and March 2025:

• Over 7 million tokens deployed with at least five trades, but only 97,000 tokens maintain liquidity above $1,000.
• A staggering 98.6% of tokens on Pump.fun collapse into worthless pump-and-dump schemes shortly after launch, highlighting the extreme risk traders face without proper monitoring. 

Understanding the token economics on Pump.fun further reveals systemic risks. Its automated market maker (AMM) employs a bonding curve pricing model, inherently favoring token creators. 

The bonding curve is a pricing mechanism where token prices increase exponentially with each additional purchase of that token, inherently benefiting early buyers and disadvantaging late entrants. Creators stand to profit directly from each incremental purchase, while traders who join later invariably face inflated token prices and heightened risk of severe losses when creators liquidate their holdings. This was witnessed with the Gen Z Quant rug pull. 

Furthermore, a recent report by Pine Analytics highlighted the prevalence of deployer-funded, same-block sniping localized to Pump.fun, emphasizing additional methods by which token creators find ways to profit unfairly.

Rugpulls on Raydium 

Raydium, another prominent Solana DEX, utilizes traditional liquidity pools, where token creators initially fund liquidity. We examined 388,000 pools and identified transactions indicative of “soft rug pulls,” where liquidity was abruptly withdrawn, severely impacting token prices:

• Approximately 93% (361,00 pools) exhibited soft rug pull characteristics.
• The financial impact of these rug pulls is significant:
  
  • 25% involved amounts less than $732
  • Median rug pull involved about $2,832
  • The largest detected rug pull totaled $1.9 million

Such transactions demonstrate the widespread exploitation of market participants, with hundreds of traders routinely victimized by each rug pull event.

Regulatory Enforcement Trends and Institutional Risk Exposure

Regulators and law enforcement at the federal and state levels are starting to take action, highlighting the increased risks for meme coin market participants. 

Recent SEC and DOJ Actions

Under Acting Chairman Mark Uyeda in March, the SEC set up a Cyber and Emerging Technologies Unit to “root out those seeking to misuse innovation to harm investors and diminish confidence in new technologies.” 

The DOJ has mirrored the SEC’s focus on protecting consumers and investors, shifting from a focus on enforcement actions that effectively imposed regulatory frameworks on digital assets to an emphasis on prosecuting instances of financial harm caused by fraud, scams, or other serious crimes. In an April 7th memo regarding priorities, Deputy Attorney General Todd Blanche indicated that the Department would  “prioritize investigations and prosecutions that involve conduct victimizing investors, including … digital asset investment scams, fake digital asset development projects such as rug pulls, … and exploiting vulnerabilities in smart contracts.”

State-Level Enforcement 

In March, a bill introduced in New York State sought to criminalize the deployment of code-based crypto scams. Regarding rug pulls, it focuses explicitly on the conduct of the token creator and their behavior around the token launch and subsequent trading. Its core goal is to provide a clear legal framework for prosecutors to pursue this type of activity. 

Beyond these explicit statements from the regulatory and enforcement communities, a class action lawsuit was filed with the SEC in April against the Solana DEX Meteora, naming individuals associated with the operation of the platform and the launch of the $M3M3 meme coin, alleging that these insiders were responsible for a $69 million rug pull associated with the launch. The merits of this particular class action lawsuit notwithstanding, it demonstrates the scale of these token launches, the rapid rise and fall of the value of the meme tokens included, and the potential for consumer and investor harm. 

Implications for Crypto Institutions

The recent DOJ Crypto Enforcement Memo and increased regulatory scrutiny from bodies like the SEC highlight a clear expectation: institutions must proactively prevent investor harm from fraudulent crypto schemes. 

While the DOJ has explicitly moved away from prosecuting platforms solely for regulatory violations, it has underscored that platforms failing to adequately detect and mitigate fraud, such as rug pulls or pump-and-dump scams, could still face severe legal consequences, including substantial fines, reputational damage, and enforcement actions targeting executives responsible for compliance lapses. 

Conclusion: Securing the Future of Memecoin Trading

The explosive popularity of memecoins offers both opportunity and risk. Our research underscores the urgency for institutional-grade safeguards to protect platforms’ users, reputations, and risk posture from rampant fraud on Solana. With 98% of Pump.fun tokens and 93% of Raydium pools showing signs of manipulation, it’s no longer a question of if fraud will happen, but whether you’re equipped to detect and respond when it does.

That’s where Token Sniffer comes in.

Now enhanced with full Solana coverage, Token Sniffer is a rug pull detection tool purpose-built for today’s rapidly evolving DeFi landscape. It empowers both crypto compliance teams and institutions with real-time insights that help flag threats before users are impacted, making it an essential tool for both SaaS buyers and regulated entities managing exposure in token ecosystems.

Token Sniffer Solution: Advanced Monitoring and Protection

Given these substantial risks, it is clear that crypto institutions require a robust and proactive monitoring solution. Solidus Labs’ Token Sniffer tool provides insightful, real-time coverage of the Solana blockchain in addition to its existing network coverage. By combining onchain analytics with critical offchain signals, Token Sniffer proactively identifies and alerts institutions to potential fraudulent activity across memecoins and other tokens.

Key protective features include:

• Liquidity Assurance: Automatic detection of liquidity pool security, ensuring liquidity tokens are burned or securely locked.
• Token Distribution Monitoring: Immediate identification of tokens with concentrated holdings, signaling potential manipulation risks.
• Event-Based Alerting: Real-time alerts driven by block-by-block token-focused monitoring, allowing institutions to manage exposure proactively.
• Offchain Inputs: Signals include influencer and KOL tracking, developer-associated background checks, and sentiment analysis from platforms like X (Twitter), Telegram, Discord, and Reddit.

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Actionable Takeaways for Crypto Institutions

To effectively manage memecoin trading risks, institutions need to:

Deploy integrated monitoring tools capable of combining onchain activity with offchain market signals.

Prioritize automated security checks, such as liquidity locking and ownership distribution.

Regularly evaluate tokens using scoring systems like Token Sniffer’s 100-point scale, avoiding tokens rated below 80.

Token Sniffer is more than a rug pull detection tool, it’s an institutional-grade crypto compliance solution that helps safeguard your platform and your users. Explore the Token Sniffer API or Contact Us to get started with custom integration options.

Appendix

Pump.fun Methodology

For Pump.fun, we wanted to showcase that it is designed to be a rotating door of tokens where users get manipulated into buying, and the developer always sells at an advantage. The primary statistic we wanted to highlight was: how many tokens created on Pump.fun drop to zero activity?

• First, we get all the buy and sell instructions on Pump.fun happening for tokens created earlier than 4/1/25 (to be generous with recently deployed tokens).
• With each buy and sell instruction, we track the remaining SOL in the pool to determine its liquidity after each operation.
• We then track how many tokens with at least five trades currently remain above $1,000 liquidity, meaning they can still feasibly be traded.
• We also discount tokens upgraded to Raydium once they complete the bonding curve. 
• With this, we arrive at the 98.6% metric, which represents the percentage of tokens on Pump.fun that have fallen under $1,000 worth of liquidity measured in SOL, and are thus, essentially worthless. 

Raydium Methodology

We focused on Raydiuym’s V4 AMM for two reasons:

1. It is the most popular by a considerable measure
2. For the long-tail of memecoins, scammers don't bother with concentrated liquidity products since the token will never be big enough to warrant having different positions.

We focused on a specific type of rug pull here: liquidity sweeps. The order of operations for a liquidity sweep generally follows the stages below:

1. Liquidity pool deployer provides all of a pool's liquidity for a memecoin token and pairs it with SOL
2. Liquidity pool deployer waits for users to trade on the pool
3. When the pool's SOL supply increases due to traders buying the meme coin, the Liquidity pool deployer removes liquidity
4. The Liquidity pool deployer profits from the increased amount of value that was within the pool
   

To determine what qualifies as a liquidity swap, we took the following approach: 

• Obtained  all of the deposit and withdrawal instructions on Raydium V4
• Identified all LP token mint and burn instructions associated with those deposits and withdrawals.
• Sorted the instructions chronologically for each token and figure out the total existing LP tokens existing at the moment of burn, and based on that calculate what % of the liquidity was just withdrawn (so if 20% of the total LP token supply was burned, that means 20% of the liquidity was withdrawn).

With the liquidity sweep percentage annotated for each burn, we set a threshold from which we consider a burn instruction to be a liquidity sweep. We experimented with a 50% liquidity removal threshold and a 90% threshold. Still, each threshold identified the same number of sweeps, meaning scammers consistently execute liquidity sweeps on almost all available liquidity within a pool.

We used the 90% threshold for the analysis and then identified how much was taken out of the pool with that withdrawal instruction, which was recorded in the final study.