The lawsuit, filed on December 19, accuses the defendants of promoting and selling unregistered securities and engaging in misleading marketing practices.

The Rapid Rise and Fall of $HAWK

The Hawk Tuah memecoin debuted with a market capitalization of approximately $16.6 million but saw its value skyrocket to $491 million within hours of its launch. This meteoric rise was short-lived as the token’s value plummeted by over 90%, leaving investors with substantial losses. By the end of the day, the market cap had fallen to approximately $60 million.

Source: X

Investors and analysts characterized the launch as a “pump-and-dump” scheme. This sentiment was fueled by allegations that connected wallets held 96% of the token’s supply, with significant amounts reportedly sold off during the token’s initial surge.

Legal Action Against Key Figures

The lawsuit names several defendants, including OverHere Ltd., Tuah The Moon Foundation, and individuals Clinton So and Alex Larson Schultz (also known as “Doc Hollywood”). The plaintiffs, represented by Burwick Law, claim that these corporations used the prominence of social media influencer Hailey Welch to generate buzz about the token.

Haliey Welch, aka Hawk Tuah Girl, at DreamHack Atlanta in November 2024. Source: Wikipedia

Welch, who gained popularity earlier this year with a viral TikTok video, was chosen as the project’s face. Her engagement added credibility to the memecoin, enticing more cryptocurrency investors. Despite her major participation, Welch is not named as a defendant in the claim.

“The project clearly targeted the U.S. market by tying the token’s success to Welch’s reputation,” the plaintiffs argued. “This led many to believe they were effectively investing in a share-like asset.”

Allegations of Mismanagement and Industry Reactions

Court filings reveal that a pre-sale of the token raised $2.8 million ahead of its launch. Following the token’s collapse, Clinton So allegedly moved Tuah The Moon Foundation offshore and sold 17% of the tokens through the organization to avoid U.S. securities laws. OverHere Ltd. claimed it did not profit from the project, stating that Doc Hollywood controlled critical aspects, including fees and treasury decisions, but failed to fulfill his responsibilities.

The controversy has drawn widespread criticism of Welch, who faced accusations of participating in a “money-grab scheme.” Welch denied the allegations, stating on the social media platform X: “The team hasn’t sold a single token. We tried to deter snipers by imposing high fees at launch.” Welch has since remained silent on social media, further fueling speculation about her role in the project.

Crypto attorney Carlo D’Angelo, not involved in the case, commented on the situation: “This serves as a cautionary tale for influencers who lend their names to crypto ventures without understanding the full scope of their implications.”

Lessons for Investors in Celebrity-Backed Tokens

This case emphasizes the hazards connected with celebrity-endorsed digital currency initiatives. Similar incidents, such as YouTuber Logan Paul’s failed CryptoZoo venture, highlight the significance of openness and accountability in the crypto space.

As the judicial procedures continue, this case serves as a strong reminder to investors to take caution and conduct extensive research before investing in speculative digital assets. Meanwhile, the defendants have expressed confidence in their legal position, with OverHere Ltd. declaring, “We are confident that we have done nothing wrong and look forward to resolving this matter in court.”