A class action lawsuit has been filed against Meteora, a Solana-based decentralized exchange (DEX), and Kelsier Labs, an investment firm, over allegations of manipulating the memecoin M3M3 token manipulation for personal profit.
The lawsuit, filed on April 22 in the U.S. District Court for the Southern District of New York, accuses these entities and several individuals of orchestrating a scheme that caused investors to lose at least $69 million . The case sheds light on the growing concerns surrounding manipulative practices in the cryptocurrency space and highlights the risks faced by retail investors in unregulated markets.
The Allegations: A Coordinated Manipulation Scheme
According to the amended complaint, Meteora and Kelsier Labs allegedly engineered a sophisticated media campaign to promote M3M3 as a “high-quality memecoin“. Central to this campaign was the reputation of prominent figures in the Solana ecosystem, including former Meteora leader Ben Chow, who was portrayed as a symbol of transparency and trust. However, plaintiffs argue that this was merely a facade to facilitate M3M3 token manipulation , artificially inflating its price to lure unsuspecting investors.
However, plaintiffs argue that this was nothing more than a “media drama” designed to inflate the token’s price artificially. Investors claim that the defendants manipulated the token’s issuance and trading activity to create a false sense of value, driving the price to unsustainable levels. This FOMO (Fear of Missing Out) effect attracted countless retail investors, who bought in at inflated prices only to witness the token’s collapse shortly thereafter.
The lawsuit states:
“Immediately after M3M3 was released, the token price skyrocketed. The organizations behind it used this surge to make investors believe that M3M3 was truly valuable and low-risk, when in fact it was just the result of manipulation.”
As a result, investors lost millions as the token’s market capitalization plummeted from over $216 million at its peak to just $3 million by April 2025.
The Role of NFT LPs and Liquidity Draining
The plaintiffs further allege that the M3M3 system was structured to exploit small investors. Key figures from Meteora and Kelsier Labs reportedly colluded with influencers and key opinion leaders (KOLs) to manipulate prices, creating artificial hype and encouraging mass participation. Once the token reached its peak, liquidity was allegedly drained through deceptive practices, including the use of NFT LPs (Liquidity Provider tokens) to obscure on-chain cash flows.
This “machine to drain” strategy reportedly distributed tokens first to internal users, leaving small investors vulnerable to significant losses. The lawsuit also connects this case to a series of similar projects, including MELANIA , LIBRA , AIAI , MATES , and ENRON , which collectively resulted in losses exceeding $200 million .
Moty’s Accusations and Ben Chow’s Resignation
Before the lawsuit was officially filed, Moty , founder of DefiTuna, publicly accused Kelsier Ventures and Meteora of orchestrating a large-scale memecoin manipulation scheme. Moty claims to have returned a $30,000 investment voluntarily and provided evidence suggesting collusion between key figures, including Meteora co-founder Ben Chow, and a network of influencers.
Under mounting public scrutiny, Ben Chow announced his resignation as Meteora’s leader. His departure came amid revelations linking him to the alleged manipulation, further fueling outrage within the crypto community.
Broader Implications for the Crypto Market
The M3M3 scandal is not an isolated incident. It follows the March 2025 class action lawsuit involving the memecoin LIBRA , whose collapse sent shockwaves across the crypto market. Without stricter regulations, fraudulent activities like M3M3 token manipulation will continue to exploit retail investors.
Key takeaways from this case include:
- Risks of Unregulated Markets :
The lack of oversight in the crypto industry makes it susceptible to manipulation and fraud. Retail investors are particularly vulnerable to schemes that exploit their trust and enthusiasm. - Importance of Transparency :
Legitimate projects prioritize transparency by providing regular updates, audited financial reports, and clear communication about risks. Projects lacking these elements should raise red flags for potential investors. - Need for Accountability :
High-profile lawsuits like this highlight the importance of holding bad actors accountable. Without consequences, fraudulent behavior will continue to undermine trust in the broader crypto ecosystem.
Lessons for Crypto Investors
The M3M3 token lawsuit serves as a cautionary tale for anyone considering investing in cryptocurrencies. Here are some critical lessons:
- Conduct Thorough Due Diligence :
Before investing, research the project’s team, roadmap, and track record. Be wary of anonymous developers or exaggerated promises. - Avoid FOMO-Driven Decisions :
Scammers often exploit FOMO to lure investors into buying at inflated prices. Always approach investments with a rational mindset and avoid impulsive decisions. - Verify Liquidity and Token Distribution :
Ensure that the project has sufficient liquidity and a fair token distribution model. Unequal allocations or hidden mechanisms like NFT LPs can signal potential manipulation. - Stay Informed About Risks :
Educate yourself about common scams, such as rug pulls, pump-and-dump schemes, and liquidity draining. Awareness is your best defense against fraud.
The Road Ahead for Crypto Regulation
The M3M3 token lawsuit underscores the pressing need for comprehensive regulation in the cryptocurrency sector. Policymakers must address the unique challenges posed by decentralized platforms while balancing innovation and investor protection. Potential measures could include:
- Mandatory audits for token issuers.
- Stricter guidelines on marketing and fundraising practices.
- Enhanced penalties for fraudulent activities.
- Public education campaigns to raise awareness about crypto-related risks.
By implementing these safeguards, regulators can help restore trust in the crypto market and protect retail investors from falling victim to similar schemes in the future.
Conclusion: A Stark Reminder of Crypto Risks
The class action lawsuit against Meteora and Kelsier Labs underscores the dangers of M3M3 token manipulation and the urgent need for regulatory oversight. With allegations of a $69 million fraud , the case exposes the vulnerabilities of an unregulated market and emphasizes the importance of due diligence and accountability.
For investors, this incident reinforces the need to approach crypto investments with caution and skepticism. For regulators, it underscores the urgency of establishing robust frameworks to prevent future scams. And for the industry as a whole, it presents an opportunity to reflect on its practices and work toward building trust and legitimacy.
As the legal battle unfolds, one thing is certain: the outcome will have far-reaching implications for the future of cryptocurrency. Are you prepared to navigate this evolving landscape responsibly?
