Sellers and promoters of the Hawk Tuah cryptocurrency never registered the U.S.-marketed memecoin with the SEC and left investors in the lurch during a 90 percent crash, a lawsuit filed Thursday says.

Investors said they collectively lost more than $151,000 after investing in the cryptocurrency modeled after “Hawk Tuah Girl” Haliey Welch, whose viral phrase boosted her social media fame. They are suing the Tuah The Moon Foundation, which raised funds from the $HAWK token; overHere Ltd and its founder Clinton So, who launched the memecoin; and social media influencer Alex Larson Schultz, who promoted it online, in the First U.S. District Court for the Eastern District of New York, claiming the defendants were liable for selling unregistered securities.

Memecoins, which rely on cultural references and online fandom to gain traction, are accessible and have a low barrier to creation, investors said. The marketing began with Welch – who is not named as a defendant – announcing the token on her social media. They promoted it on their channels, in the podcast and in a pre-sale campaign with free or discounted tokens, which increased the attractiveness of the product.

The defendants allegedly fed off their fame and created a buzz before it officially launched on December 4th. A presale brought in about $2.8 million on a valuation of $16.69 million, the plaintiffs said. These tokens were immediately tradable upon introduction. Within hours, the memecoin’s market value rose to $491 million, but soon plummeted by over 90% to under $100 million.

The next day, So said they were advised by lawyers to set up the Tuah Foundation as an offshore company and, through it, sell an initial allocation of 17% of the tokens to a subset of people, allegedly to circumvent securities laws. However, investors said the defendants continued to market the remaining 83% of tokens and made “no serious attempt” to limit buyers to those outside the US. “The project was clearly aimed at exploiting the American market,” the complaint states.

By “linking the success of social media influencers like Welch, he was literally saying that token holders were essentially shareholders,” the investors said.

“Despite these clear indications of its status as a security, the $HAWK token has not been registered by defendants,” they said.

“We have been extremely transparent about the limited scope and scope of our involvement in the Hawk Tuah token project. We are confident we have done nothing wrong,” an overHere spokesperson said in an email. “As far as any litigation goes, we will let the process play out in court.”

Welch has remained out of the public eye since the crypto crash, not posting on social media or releasing her podcast for two weeks.

Wolf Popper LLP and Burwick Law PLLC represent the investors.

Attorneys at both firms, Schultz and Welch’s manager each did not respond to requests for comment.

The case is Albouni et al v. Schultz et al, EDNY, No. 1:24-cv-08650, appeal filed 12/19/24.