The recent lawsuit surrounding the “Hawk Tuah” memecoin has brought to light the risks associated with investing in tokens that may not be compliant with securities laws. Investors who were lured in by the promise of quick profits based on the popularity of Haliey Welch’s internet persona have now found themselves facing significant financial losses.
The lawsuit, filed in the US District Court for the Eastern District of New York, names Tuah The Moon Foundation, overHere Ltd, founder Clinton So, and influencer Alex Larson Schultz as defendants. It alleges that these parties are responsible for a sharp decline in the value of the HAWK token, which resulted in investors losing over $151,000.
The token’s value soared on the back of Welch’s internet fame, which was amplified through social media and podcast promotions. The pre-sale of the token raised millions of dollars, with the token’s valuation reaching millions more. However, after the token launched on Dec. 4, its market cap experienced a dramatic rise followed by a rapid crash. Investors allege that the creators of the token misrepresented it as an investment opportunity, leading them to believe they were gaining shareholder status by owning the token.
On-chain data analysis revealed that a small group of related wallets controlled the majority of the token’s supply, further fueling suspicions of market manipulation. Additionally, the defendants allegedly attempted to skirt US securities laws by setting up an offshore entity, but failed to prevent US investors from participating in the token sale.
As a result of the token’s collapse, Welch has retreated from the public eye, ceasing her social media activity and podcasting. This incident is just one in a series of celebrity-backed memecoin failures this year, with tokens linked to individuals like Andrew Tate, Jason Derulo, and Caitlyn Jenner also resulting in substantial losses for investors due to supply concentration in a few wallets.
It is crucial for investors to exercise caution and conduct thorough research before investing in any cryptocurrency or token, especially those tied to celebrities or influencers. Compliance with securities regulations and transparency in token distribution are essential factors to consider when evaluating the legitimacy of a project.
