Haliey Welch’s $HAWK Shows Why We Need Better Standards for Memecoins

Haliey Welch, widely recognized as “Hawk Tuah,” transformed her fleeting viral fame into a formidable media empire. With a burgeoning social media presence (230K followers on Instagram), lucrative brand partnerships, and the successful podcast Talk Tuah, Welch appeared to be transitioning from internet personality to business mogul.

That was until the 22-year-old launched her memecoin, $HAWK. Now Hawk Tuah isn’t flying so high.

$HAWK was launched on the Solana blockchain with considerable fanfare, initially skyrocketing to a $491 million market cap. This meteoric rise was short-lived, as the coin’s valuation plummeted to under $20 million, according to data from DEX Screener.

The rapid decline raises questions about the project’s legitimacy and the motives behind its management. A now-deleted Twitter Spaces discussion further intensified suspicions, leading to widespread allegations that $HAWK is nothing more than a “celebrity rugpull.”

To understand what happened, it is first necessary to examine the structure and decision-making processes that seemed to have underpinned the $HAWK launch.

Launching a memecoin might seem like a walk in the park (anyone can do it on Pump.fun). But doing it successfully is much harder. It requires capital, marketing and technical expertise alongside something good in the first place. You need teamwork. I say this as a founder who’s been in Web3 since 2013, has raised tens of millions of dollars in venture capital for projects of my own, and is a venture capitalist at a large venture fund, Foresight Ventures. (For more on how to launch a memecoin, see my other recent CoinDesk article here). $HAWK seems to have had three distinct teams behind it, according to internet sleuth Coffeezilla:

• Welch’s Web2 team, responsible for her “traditional” brand
• Memetic Labs, led by founder Doc Hollywood, managing blockchain-related activities and holding the pen on all Web3 related decisions
• and overHere, a new technical service provider specifically brought in to facilitate a novel token claim process designed to onboard Welch’s Web2 audience.

OverHere initially engaged in discussions with me to provide context about its role and said it was open to providing anything more in a transparent manner.

In a since deleted X Spaces, Welch abruptly dropped off around 1:00am EST, telling listeners she was going to sleep. Doc Hollywood dominated the conversation. His company Memetics Labs was responsible for critical aspects of the token release, such as tokenomics, token minting and distribution, marketing (e.g. messaging over primary mediums such as X), liquidity pool creation, and trading fee settings.

One listener asked why the trading fees on Meteora were so high (Meteora is a decentralized exchange, or DEX, where users can trade cryptocurrencies directly, without middlemen.) Doc Hollywood said many of the expenses were related to costs associated with overHere’s team, as well as costs associated with setting up the foundation in the Cayman Islands. A claim partly refuted by overHere, who maintains it built the tech pro bono.

According to various industry sources who were made aware of the product’s only recent development, the social token utility technology overHere built had a new conceptual-business model. It’s one that would tokenize likeness and intellectual property tied to Web2 fans. And it’s not something that has existed in prior memecoin launches, let alone any crypto project.

Welch’s team, likely on the advice of Web3 adviser Memetic Labs, implemented exorbitant pool fees of 15% on Meteora, a decision that drew criticism from overHere when I first contacted on December 4. It seemed to maximize short term profits at the expense of the trust of both Welch’s existing Web2 community, as well as the Web3 community she hoped to expand into with this launch. High trading fees undermine the project’s credibility.

Another point of contention: the sale of millions of tokens post-launch by pre-sale investors, who were granted unrestricted access to vest their tokens. This effectively diluted the token’s value and raised suspicions of insider manipulation.

OverHere maintained its involvement was devoid of financial incentives, claiming no profits from Meteora or the pre-sale, and no access to free tokens. It described its focus as establishing $HAWK as a pioneering case study for leveraging intellectual property in token launches. However, the project’s trajectory, shaped by decisions from Welch’s Web3 team, was marred by mismanagement and missteps that made that impossible.

A lack of transparency emerges as the most significant failing in the $HAWK saga. The absence of a publicly disclosed tokenomics and distribution plan prior to the launch gave rise to accusations that the team was insider-dealing. Critics used BubbleMaps, an auditing tool for DeFI and NFTs, to claim that 96% of the tokens were allegedly allocated to the “team.” overHere later said the actual distribution for “the team” was 10%, which includes allocations for the community fund, reserves, and strategic purposes.

According to overHere’s understanding, the Web3 team — which maintained sole deployer wallet access — has denied selling these tokens. In reality, it appears this selling pressure originated from certain pre-sale investors whose involvement was never publicly disclosed prior to the launch. The initial confusion underscores a failure in communication and transparency from the outset.

Another issue was lock and vesting mechanisms were not immediately implemented, but this delay stemmed from technical bugs within the vesting protocol. All discussions regarding the token’s lock and vesting schedules were managed by Welch’s Web3 team in collaboration with Magna, the service provider overseeing these mechanisms. OverHere was intentionally uninvolved in these decisions, emphasizing its role as a technical service provider rather than an operational team. It has expressed a willingness to provide extensive documentation to clarify its position and responsibilities.

Industry experts such as Ellipsis’ Jarry Xiao have said they didn’t think Welch’s team(s) had “malicious intent (this was clearly not their desired outcome). But without evidence to the contrary, this appears to be a blatant cash grab without any consideration of the consequences to retail.”

The story is a stark reminder of the perils inherent in merging celebrity influence with the nascent and often unregulated cryptocurrency market. The promise of decentralized finance funding media empires without traditional equity sales is alluring, yet $HAWK exposes the fragile foundation upon which such ventures are built. The lack of transparency, accountability, and ethical oversight can swiftly transform a promising project into a cautionary tale.

$HAWK is a testament to the critical need for robust governance frameworks and unwavering transparency in Web3 initiatives. As the team endeavors to rebuild trust and redefine $HAWK’s purpose, we, the crypto industry, must heed this lesson: without clear accountability and open communication, even the most promising projects are susceptible to collapse. We need to embed transparency and accountability at the core of all Web3 projects, particularly those of high-profile personalities who can just as easily become victims of exploitation.