Pudgy Penguins Crash! Investors Sued by SEC, PENGU Weekly Drop of 20%

Pudgy Penguins native token PENGU experienced a catastrophic sell-off this week, plummeting nearly 80% from a high of $0.04. The trigger for this collapse was the SEC filing charges against its main investor, Shima Capital, and founder Gao Yida, accusing them of implementing a fraudulent investor scheme. Internal emails leaked show Gao telling the founder of the portfolio company that he plans to step down and gradually dissolve the fund.

SEC lawsuit against Shima Capital triggers trust crisis

(Source: Kate Irwin post)

According to crypto journalist Kate Irwin, the U.S. Securities and Exchange Commission filed a lawsuit three weeks ago against the crypto venture capital firm Shima Capital and its founder Gao Yida, accusing them of executing a fraudulent investor scheme. The specific details of the lawsuit have not been fully disclosed, but SEC’s involvement alone is enough to trigger market panic.

Shima Capital was founded during the 2021 bull market peak, managing about $200 million in assets. Its portfolio includes high-profile projects such as Berachain (Layer-1 blockchain), Monad (high-performance EVM chain), and Pudgy Penguins. This diversified investment strategy was highly praised during the bull market, but now it has become a source of contagion risk. When the SEC accuses the fund of fraud, all portfolio projects are implicated, even if those projects have no misconduct themselves.

Even more damaging is the exposure of internal emails. Gao told the founder of the portfolio company that he plans to step down and begin to gradually dissolve the fund. Such dissolution usually means forced liquidation of assets to return funds to investors. For Pudgy Penguins, if Shima Capital needs to sell its holdings of PENGU tokens, it will create enormous selling pressure in the market.

After the news broke, PENGU’s price dropped 20%, falling below $0.0097. Although there was a slight rebound afterward, the outlook remains uncertain. This plunge is not only a technical breakdown but also a collapse of market confidence. When a major investor in a project faces legal issues and plans to dissolve, other institutional investors instinctively stay away, and retail investors panic sell.

Shima Capital crisis hits Pudgy Penguins with a triple blow

Forced liquidation risk: Shima dissolving the fund will require selling PENGU holdings, potentially amounting to millions of dollars, creating structural selling pressure

Funding channels cut off: As an early investor, Shima might have continued to invest in subsequent rounds, but now this channel is completely severed

Reputation damage: Projects invested by the SEC-charged fund will be avoided by other institutions, forming a negative label effect

This multi-layered blow leaves Pudgy Penguins with little chance to rebound in the short term. Unless the project team can quickly bring in new top-tier investors to replace Shima Capital, the trust crisis will continue to ferment.

December curse and retail capital depletion

(Source: Trading View)

Even without the Shima Capital crisis, Pudgy Penguins faces structural headwinds in December. Historical data shows that December is one of the worst months for meme coins. Retail funds are the main driver of meme coin prices, and trading volume drops sharply during the holiday season. This seasonal effect is clearly reflected in December 2023 and 2024.

Meme coins lack fundamental support; their prices depend entirely on community enthusiasm and speculative sentiment. When traders shift focus to family gatherings during Christmas and New Year, meme coin liquidity rapidly dries up. Without new capital inflows, prices naturally stagnate. Worse, year-end is also the time retail investors settle their annual gains and losses—losing positions are sold for tax loss harvesting, while profitable positions are held to avoid short-term capital gains taxes. This behavior further drains market liquidity.

Pengu has fallen 66% over the past two and a half months and may continue to decline. From a technical perspective, it needs to hold the key support at $0.009 (the original text says $0.093, which is likely a typo), or the price could further slide. This support level is the low point of previous consolidation and a common stop-loss zone. If broken, the next support could be in the $0.007–$0.008 range.

Looking at RSI (Relative Strength Index), PENGU has entered oversold territory, which theoretically allows for a technical rebound. But oversold can become more oversold, especially under the dual pressure of ongoing negative news and seasonal factors. The MACD indicator continues to show bearish divergence, indicating that downward momentum still dominates.

Three conditions for a year-end rebound

To achieve a meaningful rebound in December, Pudgy Penguins needs to meet three conditions. First, a new investor publicly announces taking over Shima Capital’s share, which would eliminate fears of forced selling. Second, the project team releases major product updates or partnerships to reignite community enthusiasm. Third, the overall crypto market sentiment improves, with Bitcoin returning above $100,000, driving a broad meme coin rally.

However, the likelihood of these three conditions materializing in the current environment is low. With the holiday season approaching, institutional investors are already on vacation, and major announcements are usually delayed until January. Even if the project has good news, they tend to release it when market liquidity is better to maximize impact. Overall, Bitcoin is currently struggling around $85,000, with hawkish Fed comments and Bank of Japan rate hike expectations still suppressing risk appetite. Breaking above $100,000 in the short term is unlikely.

Therefore, the possibility of Pudgy Penguins rebounding in December is very low. A more realistic expectation is for continued bottoming, with prices oscillating between $0.008 and $0.012, waiting for market sentiment and liquidity to recover in January next year before seeking a breakout. For holders, this is a painful waiting period, but blindly bottom-fishing could lead to greater losses. For potential buyers, waiting until the Shima Capital crisis is fully resolved and clear bottom signals appear may be a more cautious strategy.