Yet another “celebrity” token memecoin project seeking to leverage a “cultural movement” has become the subject of a lawsuit alleging that the tokens were unregistered securities. A group of plaintiffs recently sued over the promotion and sale of the Hawk Tuah cryptocurrency memecoin, known as the “$HAWK” token.
According to the complaint, Defendants leveraged the extensive social media following of newly minted celebrity Hailey Welch, a prominent social media personality known as the “Hawk Tuah Girl,” to market the Token as a groundbreaking cryptocurrency project. After aggressive promotional campaigns and promises of future growth, the token’s value spiked, then crashed.
The marketing framed the token as more than a “speculative asset”, portraying it as a cultural movement with significant growth potential. The marketing touted Welch’s involvement and her reputation as a trusted public figure to convince potential investors that the project was poised for success. Yet, according to Plaintiffs, the token’s success depended entirely on the entrepreneurial and managerial efforts of Welch and her project team.
According to Plaintiffs, these facts (if proven) indicate that the token was an unregistered security. The investors paid money and expected profits, there was a common enterprise, and the profits were dependent on the entrepreneurial and managerial efforts of Welch and her project team. If true, arguably these facts meet the elements of the Howey test.
Plaintiffs acknowledge that Welch’s team launched a pre-sale campaign that included free or discounted token distributions through airdrops and whitelists. These efforts allowed select investors to receive free tokens and priority access to the project. The use of whitelists conveyed exclusivity and allegedly incentivized early participation, fostering a sense of urgency among Welch’s followers and the cryptocurrency community at large. These activities were promoted by Defendants and suggested that the token would go “Tuah the Moon,” suggesting it would experience significant appreciation as subsequent purchasers paid higher sums. Welch’s credibility as a public figure and her direct involvement with the project allegedly amplified the statement’s impact.
This is the latest in a string of celebrity backed memecoins or token projects that have crashed and burned and resulted in a lawsuit. Not all tokens are securities. But as we have stressed before, it is critical for token projects to ensure they work with competent counsel to structure tokens in a way that do not subject them to securities laws and lawsuits.
