They Named It After a Top VC Firm. Now Investors Say It Was Crypto Fraud.
A proposed class action lawsuit filed in federal court alleges the founders of a cryptocurrency project engineered a fraud that wiped out hundreds of millions of dollars in investor value over more than a year.
Plaintiff Gorka Pikabea, a resident of Spain, filed the case April 20, 2026, in the U.S. District Court for the Southern District of New York. The lawsuit names Eliza Labs Inc., Shaw Walters (founder of Eliza Labs), Sebastian Quinn-Watson and AI16Z DAO as defendants, along with 50 unnamed parties referred to as Does 1 through 50.
The proposed class includes everyone who purchased $AI16Z tokens, later migrated to a new token called $ELIZAOS, between Oct. 24, 2024, and April 20, 2026. The complaint identifies at least 3,945 wallet addresses that sustained losses during that period. The lawsuit seeks actual damages, treble damages, restitution, disgorgement of profits, injunctive relief and attorney's fees.
Borrowed credibility
The complaint alleges the defendants named the project "AI16Z" to mimic "a16z," the widely recognized abbreviation for Andreessen Horowitz, one of Silicon Valley's most prestigious venture capital firms. They also reportedly named the AI agent at the heart of the project "Marc AIndreessen," a play on the name of Andreessen Horowitz's co-founder Marc Andreessen. AI16Z allegedly used the names without Andreessen's or the firm's authorization, the complaint states.
Within days of launch, Marc Andreessen acknowledged the project in a post on X. The complaint alleges that single acknowledgment caused the token's market capitalization to surge to $80 million, demonstrating how tightly the project tied itself to the real Andreessen Horowitz brand.
The defendants also worked to construct what the complaint describes as a comprehensive facade of legitimacy. According to the lawsuit, they built a professional website at elizaos.ai, a documentation portal and GitHub repositories showing hundreds of contributors.
The lawsuit also alleges AI16Z misrepresented the AI underpinning the project. On Oct. 30, 2024, cryptocurrency news outlet Protos reported that humans actually operated the AI agent and it was not autonomous as advertised..
Alleged insider trading, broken promises and a market collapse
The complaint alleges that In November 2024, Walters made a public statement on X that the AI16Z project would not create a new coin. However, the lawsuit claims Walters simultaneously worked for at least two weeks on a separate Eliza-branded token.
He released the new $ELIZA token on Nov. 19, 2024. It surged past an $80 million market capitalization within one hour. Meanwhile, the original $eliza token crashed approximately 87%, devastating holders, according to the complaint. The lawsuit also cites on-chain data it says showed a wallet linked to an AI16Z managing partner known as "Logan" who sold holdings immediately before Walters made his public announcement. It characterizes this as evidence of insider trading.
The token reached its all-time high of approximately $2.47 on Jan. 2, 2025, when its total market capitalization exceeded $2.6 billion. The very next day, the complaint alleges, large holders began to liquidate millions of dollars worth of tokens. By Jan. 11, 2025, the most profitable single trader realized $39 million in profit. The token fell 39% within eight days of its peak.
On Jan. 28, 2025, Chris Dixon of a16z Crypto publicly revealed on the Unchained podcast that Andreessen Horowitz demanded the project change its name. Dixon stated the firm "was not connected with AI16Z" and that the name created "a little bit of confusion."
Walters announced a rebrand to ElizaOS shortly after. By March 2025, the token had fallen 92% from its peak.
Token migration and supply dilution
The collapse did not mark the end of what the complaint characterizes as harmful conduct. Between October and November 2025, defendants executed a migration from the $AI16Z token to a new token, $ELIZAOS. The move expanded the total token supply tenfold, from 1.1 billion tokens to 11 billion.
Of that expanded supply, the plaintiff claims only 60% went to existing holders. It allegedly allocated the remaining 40% was allocated to insiders: 15% to undisclosed private investors, 10% to team members and contributors and the remainder to entities the defendants controlled.
The complaint alleges this arrangement effectively diluted existing token holders by 40% with no prior public disclosure, transferring value away from retail investors and toward insiders.
What this means for investors
The complaint asserts six legal claims against the defendants. Two arise under New York's General Business Law: one covering deceptive business practices and a second covering false advertising. The lawsuit files two additional claims under California's Unfair Competition Law and False Advertising Law. The complaint also includes claims for negligent misrepresentation and unjust enrichment.
Beyond compensatory damages, the plaintiff seeks statutory damages, treble damages (three times the actual loss), restitution and disgorgement of profits. The complaint also requests the creation of a constructive trust over digital assets the defendants obtained, injunctive relief to halt any further alleged deceptive practices and attorney's fees.