Libra Token Scandal Shakes Memecoin Sector

The ongoing LIBRA token scandal has taken the crypto industry by storm, sparking several debates regarding user protection

The recent LIBRA token scandal has sparked a heated discussion within the crypto community, particularly regarding the role of memecoin launchpads in protecting users from bad practices. Pump.fun's founder joined the conversation, highlighting the need for better user protection practices.

On Monday, X invited Alon Cohen, Pump.Fun's founder, to discuss the current state of the memecoin sector following the "Libragate" controversy. Cohen expressed disgust over the events that "unfolded over the past days surrounding LIBRA," where the people behind the project exploited many users, the ecosystem, "and even an entire country."

Launched on Friday, the "Viva La Libertad" project and its token, LIBRA, quickly gained attention after Argentina's President Javier Milei endorsed it in a now-deleted post. The project supposedly aimed to "fuel small businesses and startups in Argentina," reaching a market valuation of over $4.5 billion in less than an hour.

However, the project's team wallets and insiders began to cash out, selling over $100 million and crashing the token's valuation by over 90% within a few hours. Since then, President Milei has distanced himself from the project, stating in an interview that he "didn't promote it" but "spread it."

Cohen feels that the incident has significantly hurt the memecoin space, "especially as Pump.fun was built to explicitly tackle some of the issues that have been exposed" this weekend.

He criticized the need for a middlemen-like development team and market makers' involvement, noting that a memecoin "should be stupidly simple that anyone can do it" and suggesting the existence of these actors enables anyone to be taken advantage of easily.

"When we created pump fun, from the very start, it set out to standardize, automate, and democratize coin creation to build in a baseline level of safety, simplicity, and fairness for every launch."

Better User Protection RequiredThe Pump.fun's founder noted the growing aversion towards memecoins but pointed out that "the same core user behaviors that you’re seeing in the memecoin space have existed before" in other sectors, including NFTs and DeFi.

He suggested that memecoin platforms like the Solana-based launchpad should provide guardrails that ensure users are as safe as possible and meet their demands simultaneously. He listed three actions that could help achieve better user protection.

First, Cohen considers educating users on safely and ethically creating tokens to be important. According to the post, there's a lack of education on what a memecoin creator does after launching the token, how to set expectations, how much of the supply to buy and when to take profit, or what to do about snipers.

Second, he suggested that onboarding needs to be friendlier for new traders, noting that the ecosystem should onboard new users in a way that "is suited to the user’s trading experience," as just promoting advanced trading tools is "simply irresponsible."

Lastly, Pump.fun's founder believes that user protection must be taken more seriously "on an interface level." To him, interfaces can create a safer environment, reduce the visibility of tokens that display suspicious activity, set reasonable slippage settings, and more to "make this space great again."

Cohen’s post sparked a discussion about what memecoin launchpads do to protect users. Some community members considered the thread to be somewhat hypocritical based on Pump.fun's previous controversies.

As reported by Bitcoinist, the Solana-based platform faced heavy criticism in November 2024 after users exploited the launchpad’s now-unavailable Livestreaming feature to promote tokens based on controversial and potentially harmful prompts.

Others called the platform a "rug pull factory" that offers "scam coins and extract fees," with one user stating that Cohen's launchpad has "extracted more money out of Solana than anything else by a longshot."

Meanwhile, a Pump.fun user pointed out the importance of guardrails as several tokens have disguised malicious links in the platform as the project's information pages.

The extent of the LIBRA token's repercussions is yet to be seen, but it has put the spotlight on users' growing exhaustion about the continuous bad practices of malicious actors trying to benefit from crypto investors.