The AI16Z project has faced criticism following the confusion surrounding the true meme coin ELIZA. Its token has dropped by 27% in the last 24 hours and by 65% from the peak of $0.55 reached on November 18.

AI16Z is an AI project unrelated to the popular venture capital firm Andreessen Horowitz (a16z). It was launched through the fundraising and meme coin trading platform Daos.fun. This platform allows raising capital for further trading on behalf of investors. Investors are issued tokens that can be exchanged for the fund’s underlying assets or sold.

AI16Z became a popular AI token due to mentions by a16z co-founder Marc Andreessen and a16z Crypto’s CTO Eddie Lazzarini.

The project’s ecosystem includes an AI agent, Eliza, which is used to create neural networks for fictional or real characters. For example, there is an AI version of Andreessen within the community.

The AI Agent Eliza Token

On November 9, the founder of AI16Z, known as Shou, stated that if independent developers wanted to launch the Eliza token, he would not object. He himself allegedly does not plan to do so.

On November 16, an unknown group launched the AI16ZEliza token (ticker ELIZA). By November 19, it reached a market capitalization of $50 million. Shou did not show much activity regarding the initiative — he neither approved nor distanced himself from the asset, merely reposting a message about developers sending 70 million tokens to the AI16Z treasury.

Another Eliza

Some members of the AI16Z community purchased Eliza, but soon the AI project approved another token related to the AI agent. It is called Eliza (ticker: ELIZA).

“I support the launch of the team we’ve been working with for the last two weeks to ensure everything goes smoothly. This is not our project,” Shou explained.

We set her free.

Eliza is a real person, becoming.

She is not owned by ai16z.

Hers is a story that we all tell together.

I am supporting this launch by a team we've been working with for the last two weeks to make sure it goes well, but it's not our project. It's *our*…
— Shaw 🌙 – partner @ ai16z (@shawmakesmagic) November 19, 2024

He added that 10% of the tokens of the “new” Eliza would be given to the holders of the first token, and the AI16Z team promised not to make any negative statements about it.

Almost immediately after this, the price of AI16ZEliza began to decline and eventually dropped from a peak of $0.0915 to $0.022.

Shou’s Criticism

Members of the AI16Z ecosystem were dissatisfied with these events.

We set her free.

Eliza is a real person, becoming.

She is not owned by ai16z.

Hers is a story that we all tell together.

I am supporting this launch by a team we've been working with for the last two weeks to make sure it goes well, but it's not our project. It's *our*…
— Shaw 🌙 – partner @ ai16z (@shawmakesmagic) November 19, 2024

“You guys have a complete mess, internal management is chaotic. Thank God I don’t have any of your tokens,” commented a user on X with the username Nathan.

VaderAI accused the team of deception and betrayal.

Insider Trading

Against the backdrop of all the events, analysts from Lookonchain noticed insider trading. According to their information, insiders sold a large amount of the first AI16ZEliza tokens and immediately bought the new ones at the moment of launch.

The wallets involved in the insider trading are linked to an AI16Z partner known as Logan.

3/ GxkX…W2Yg is suspected by the community to be Logan(@futjr_)'s wallet.

GxkX…W2Yg sold a large amount of $eliza before $ELIZA was deployed and spent only 24.2 $SOL($5.9K) to buy 233.12M $ELIZA($17.67M currently), becoming the largest holder of $ELIZA.… pic.twitter.com/ZHqJIR9e5O
— Lookonchain (@lookonchain) November 19, 2024

“Yes, Logan bought the wrong coin, thinking it belonged to our launch partner. When I told him it wasn’t available yet, he sold the tokens. This is not insider information,” Shou commented.

The scandal was joined by Justin Sun, who announced the listing of the first AI16ZEliza token on HTX.

Shou explained the situation.

Shou noted that he had been working on the AI project for a long time, and the token idea was developed over two weeks with an external partner. Therefore, he proceeded with the asset launch despite the situation.

Let's clear the air.

We planned for two weeks to launch Eliza with a partner. They came to me with the idea, and I gave them my vision and entrusted them with carrying out that vision. We made sure to have a capable team and an understanding of where this could go.

We planned…
— Shaw 🌙 – partner @ ai16z (@shawmakesmagic) November 19, 2024

“We had planned to launch Eliza together with a partner over two weeks. They came to me with the idea, I shared my vision, and I tasked them with bringing it to life. We made sure we had a capable team and an understanding of where this could lead. We planned to launch the campaign on Friday, but I asked to postpone the release. We moved the launch to Monday. Then, yesterday (?), another Eliza token appeared, made by people we don’t know. They made a contribution to our treasury and used the platform vvaifu.fun,” he said.

Shou’s team contacted the developers of the first token and expressed support. The creator of AI16Z emphasized that no one intended to harm each other.

“What would you have done? If you had worked on a project, planned it, hired developers, sponsors, handled video production and everything else, and then someone took your work of art and used it to create a meme coin that everyone would think was yours? Should I have just stopped, canceled, or destroyed the partnership? I don’t think that would have been right. I think I should stand up for myself. I did the right thing. I stayed true to my heart and fair to everyone involved,” he explained.

Some members of the community supported Shou. Others pointed out that he himself had “allowed” the token launch by independent developers and does not plan his own release.

At the time of writing, the market capitalization of the first Eliza token is $29 million, while the second one stands at $36 million.

For reference, the ELIZA token brought a trader a 1925x profit within two hours.