Former $2.4B AI Token Faces Collapse as Creator Says the Experiment Is Over

Eliza Labs founder Shaw Walters has confirmed the closure of the ELIZAOS Foundation and urged token holders to sell their holdings, bringing the project’s token journey to an end after a legal battle, rebranding effort, and a 97% collapse from its record valuation.

Nearly 19 months after AI16Z achieved a $2.4 billion market capitalization, Walters announced that ELIZAOS, the token created as its successor, is no longer active and advised investors to exit their positions.

Walters, founder of Eliza Labs and creator of the open-source ElizaOS AI agent framework, said the ELIZAOS Foundation would cease operations and that the token would no longer receive any official backing.

“The token is dead. Completely,” Walters wrote on X. He stated that there would be no future foundation initiatives, token buybacks, or supply-related actions. Instead, he plans to continue developing the underlying ElizaOS software without introducing a new token.

Walters said the project’s technological achievements were overlooked because market participants focused mainly on token performance. He claimed that despite extensive development work, the project struggled to gain recognition as the token price declined.

ELIZAOS was trading around $0.00031, with a market capitalization of approximately $2.3 million, representing a 97% drop from its peak. The token replaced AI16Z after a migration process linked to the project’s rebranding. AI16Z reached an all-time high market value of $2.39 billion on Jan. 2, 2025, when daily trading volume climbed to $291 million. The original AI16Z token remains separately listed on CoinGecko with a market cap of roughly $375,000.

Walters said the foundation’s decision to shut down was primarily connected to ongoing legal issues. He explained that the remaining treasury funds and available resources were transferred as part of a settlement with a group of token holders represented by Burwick Law.

The group filed a proposed class-action lawsuit in the Southern District of New York in April, accusing the project of misleading advertising, deceptive practices, negligent misrepresentation, and unjust enrichment. The lawsuit alleged that AI16Z promoted itself as an “autonomous, AI-run venture fund” while Walters and other insiders retained control of the project. It also claimed investors were negatively affected during the transition from AI16Z to ELIZAOS.

The rebrand was also influenced by concerns raised by venture capital firm Andreessen Horowitz, widely known as a16z, over the similarity of the original AI16Z name.

Walters said he believed the lawsuit lacked merit but acknowledged that the project did not have enough financial resources to pursue a lengthy legal defense. He added that he once held approximately $25 million worth of tokens, but the value later declined to nearly zero.

Eliza Labs and Burwick Law have not provided immediate comments regarding the settlement details, the status of the lawsuit, or the outcome of the original daos.fun investment vehicle.

AI agent token hype loses momentum

AI16Z launched on Solana in October 2024 with the vision of creating an AI-managed venture fund where an autonomous agent would make investment decisions and token holders would participate in the ecosystem. By late December, its daos.fun vehicle had collected more than $22 million in user-provided tokens and was set to expire in October 2025.

The AI agent sector gained popularity after Truth Terminal, an AI-powered account created by New Zealand researcher Andy Ayrey, attracted attention on X for its unusual and experimental posts. The project received a $50,000 bitcoin donation from a16z founder Marc Andreessen in July 2024. A separate developer later launched the GOAT token inspired by the concept, with the cryptocurrency reaching a $1.2 billion valuation shortly after launch.

The sector expanded around the idea that AI agents could independently manage crypto wallets, publish content, interact with online communities, and create tokens linked to their activity. Virtuals Protocol allowed users to deploy AI agents, while AI16Z focused on the concept of an AI system managing investment decisions.

By early 2025, AI agent tokens had become one of crypto’s most popular narratives, with projects such as AI16Z and Virtuals driving billions of dollars in market value. However, the sector later lost momentum as investor enthusiasm faded and token valuations declined.