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Haliey Welch’s Potential charges in SEC Investigation of HAWK launch

Haliey Welch’s Potential charges in SEC Investigation of HAWK launch

CryptotimesCryptotimes2024/12/06 23:11
By:Jalpa BhavsarJahnu Jagtap

DOJ could charge criminal charges like wire fraud or laundering if evidence of deliberate financial misconduct or deception is uncovered.

Haliey Welch’s HAWK memecoin launch could be scrutinized for insider trading, and the Securities and Exchange Commission could pursue civil fraud charges. 

Despite Welch’s denials of any wrongdoing and the absence of an official inquiry, the US Securities and Exchange Commission or the Department of Justice (DOJ) could investigate the launch. If they decide to take action, Welch and her team may face significant legal consequences.

Within hours of its December 4 debut, HAWK fell 90%, from a peak valuation of $490 million to roughly $30 million, prompting considerable condemnation.

Yuriy Brisov, a partner at law firm Digital and Analogue Partners, explained that the SEC could pursue civil securities fraud charges if HAWK is classified as a security under the Howey Test. “Insider trading traditionally involves trading securities based on material, non-public information, breaching a duty of trust or confidence,” he explained.

Additionally, the DOJ could levy criminal charges such as wire fraud or money laundering if evidence of deliberate financial misconduct or deception is uncovered.

Allegations of insider trading, a supply controlled almost exclusively by a small number of addresses, fee extortion, and sniping hampered the debut.

Brisov added that in the evolving legal framework for cryptocurrencies, actions such as possessing non-public information about the token’s launch or pre-arranged strategies to sell significant portions of the supply could be scrutinized under fraud or market manipulation statutes if they led to the token’s price collapse.

Data from Dexscreener and Solana block explorer Solscan revealed over 80 wallets allocated tokens before launch, with these wallets reportedly generating profits between $10,000 and $365,000.

Welch has denied these accusations, stating on X (formerly Twitter) that her team did not sell tokens or allocate free tokens to key opinion leaders (KOLs). She claimed high transaction fees were implemented at launch to deter sniping.

Crypto lawyer Joni Pirovich noted that if evidence of insider trading is substantiated, it would compound the severity of legal repercussions. “Profiting from insider knowledge is a serious legal issue, but knowingly misleading the public adds another layer of liability,” Pirovich said.

Liability for a memecoin launch depends on how the SEC classifies crypto assets. Under Gary Gensler’s leadership, most tokens are treated as securities, requiring registration. However, the regulatory status of memecoins remains to be determined.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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