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Just How Far Could the Fallout from Javier Milei’s $LIBRA Coin “Rug Pull” Scandal Reach?

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If Milei is willing to rob not only his own citizens but his own fanbase in the broadest of possible daylight, what else is he capable of?

It takes just a minute to launch a meme coin. The tricky thing is getting a prominent influencer to endorse and promote it. When that influencer is the president of a mid-sized nation, riding high on a wave of public support and with a global fanbase on social media, success is all but guaranteed — for the coin’s inside investors. Everyone else pays the sucker’s fee.

At 7pm Friday night local time, Argentina’s President Javier Milei posted a tweet promoting a new meme coin called $LIBRA, painting it as an entrepreneurial project that might benefit Argentina’s economy. His tweet directed X users to a website at which they could buy the coin, developed by KIP Protocol and Hayden Davis. The website was called vivalalibertadproject.com, referring to the well-known phrase “Viva la libertad!” that Milei uses to close speeches and messages on his social media.

Perfect Timing

Milei’s tweet went live just three minutes after $LIBRA was launched. The timing was perfect —  arguably too perfect — and the price of the new crypto coin exploded from fractions of a cent to almost $5 in just a couple of hours. It enjoyed a brief spike in value above $4 billion in market capitalization before its value began to decline amid comments from critics that it could be a scam. Within three hours, $LIBRA had plunged by more than 80% as insiders cashed out.

Milei himself deleted his tweet after just three hours, but by then the damage had been done. And that damage was not limited to Argentine shores: investors around the world had lost tens of millions of dollars. Initial reports suggested that just over 40,000 people had lost around $87 million. More recent data suggest that over 74,000 people lost more than $268 million:

Here is a retweeted copy of Milei’s original tweet that got the ball rolling:

Translation:

“Liberal Argentina is growing. This private project will be dedicated to boosting Argentina’s economic growth, setting up small Argentine businesses and entrepreneurial initiatives. The world wants to invest in Argentina.”

Below the text was a link to the Viva Libertad Project’s website. In a later tweet, Milei claimed to have taken down his original post after realising he was not aware of all the details, insisting that he had no connection to the cryptocurrency.

“A few hours ago I published a tweet, like so many other infinite times, supporting a supposed private venture of which I obviously have no connection whatsoever. I wasn’t aware of all the details of the project, and once I was I decided to stop disseminating it (that’s why I have deleted the tweet)”.

He signed off with the following warning/threat to his political opponents:

“To the filthy rats of the political cast who want to take advantage of this situation to do harm, I would like to say that everyday they confirm how contemptible politicians are, and they increase our conviction to haul them out on their asses”.

So, no regrets, no responsibility, no apologies, not even to the more than 44,000 investors worldwide, presumably consisting mainly of members of Milei’s own fanbase, who had poured significant funds into $LIBRA coin, which is now essentially worthless.

“I have nothing to hide and I have no problem coming forward and showing my face,” Milei said on Monday in an interview with the Todo Noticias channel. “Those who entered there voluntarily knew what they were getting into. As volatility traders, they understood the risks involved.”

Milei insists he acted in “good faith”:

I didn’t promote it, I spread it. I am a fanatical techno optimist, I have a passion for technology and I want Argentina to become a tech hub.

A Classic “Rug Pull”?

After this scandal, there is little chance of that happening. Argentina’s fintech chamber has acknowledged that the case bears all the hallmarks of a “rug pull,” in which the developers of a crypto token draw legitimate investments, pumping up the value, only to later dump their stake. In other words, a classic pump and dump with a worthless meme coin.

“This scandal, which embarrasses us on an international scale, requires us to launch an impeachment request against the president,” said lawmaker Leandro Santoro, a member of the opposition coalition.

Milei already faces more than 100 complaints about his involvement in the crypto scam as well as a criminal investigation. Several Argentine politicians and lawyers filed the first criminal suit against Argentine President Javier Milei on Sunday for “illicit association”, “fraud” and “violations of the public ethics law.

On Monday, the case was assigned to Judge María Servini, head of Federal Court No. 1 in Buenos Aires. Meanwhile, the Peronist-Kirchernist coalition announced that it will move forward with a request for impeachment in Congress. To succeed, the measure, which must first be analysed in committee, will require the approval of two-thirds of the votes of the Chamber of Deputies. Another sector of the opposition reported that it will request the creation of a special investigative commission, for which a simple majority is required.

For its part, the government has launched two internal investigations to investigate its own role in the scandal, one of which will be carried out under the supervision of Milei’s sister, Karina, the general secretary of the presidency, who also allegedly participated in the scam.

International lawsuits could also soon follow. Burwick Law, one of the most important firms specializing in international cryptocurrency crimes, wasted no time in publishing a notice on social media offering advice to the victims of the Argentine president’s actions. From La Politica Online (LPO):

“If you lost money in $LIBRA, contact Burwick Law to learn about your legal rights. Our firm represents thousands of clients who want to get their money back for losses in cryptocurrencies,” the Manhattan-based firm posted.

At this time, the greatest concern for the government lies in the possibility that this firm and others will file a complaint against Milei with the Office of Foreign Assets Control (OFAC), an agency of the U.S. Department of the Treasury, which pursues financial scams and could sanction Argentina…

The government’s problem is that having dragged thousands of foreign investors into the scam, the issue is out of its control and possible measures could also come from outside. “We must not rule out that they will try to seize assets of the country, arguing that it was the president, that is, the head of the state, who promoted the scam,” another lawyer, specialized in international trials, told LPO.

Argentina’s assets are already being seized left, right and centre as a result of lawsuits over unpaid debts dating back over two decades and the government’s expropriation of national energy company YPF in 2012. The New York judge Loretta Preska recently ordered the seizure of hundreds of millions of dollars of Argentine government assets held abroad due to claims on unpaid debt from investor holdouts. Much of Argentina’s gold, which the Milei government sent to the UK months ago, even as most countries are trying to repatriate their gold, could also be up for grabs.

Mixed Messaging

The Milei government has done everything it can to play down the meme coin scandal while contradicting itself at just about every turn. For example, Milei himself has argued that he didn’t have enough information at his disposal about the coin offering, which is why he deleted his tweets hours later. Neither he nor his government have any ties to the coin developers, he insists.

Yet on Saturday, the Office of the Presidency released a statement acknowledging that Milei had personally met with representatives of KIP Protocol, the company that launched the $LIBRA coin, as well as “blockchain expert” Hayden Mark Davis, who “would provide the technological infrastructure for the project.”

In a statement and video uploaded to social media on Sunday, Davis claims he is an advisor to Milei, has been “working with him and his team” on asset tokenization projects in Argentina, and blames the collapse of $LIBRA on Milei’s decision to withdraw from the project. From BBC Mundo:

On January 30, the U.S. expert met with Milei at the Casa Rosada with the purpose of “accelerating Argentine technological development and making Argentina a world technological power,” according to the president himself in a post published after the meeting.

Davis assured that the “main sponsor” of $LIBRA is Julian Peh, a Singaporean tech entrepreneur and founder of KIP Protocol, who also met with Milei in October, and who has blamed Kelsen Ventures for the failure of the new crypto.

On $LIBRA, Davis pointed out that “the launch definitely did not go as planned,” but denied one of the main accusations that have arisen about the token, and that is that it was simply a scam through a maneuver known in English as rugpulling, in which a cryptocurrency is created and given value through investors and promoters. only to then withdraw all the money.

Davis assured that he will provide $LIBRA with more “liquidity” by reinvesting about US$100 million of funds, including the money obtained through the fees charged, and called on all crypto platforms that offered the token to do the same.

As for the sudden collapse of the crypto asset, he blamed the president for having withdrawn his support for the project, detracting from its credibility.

The Spanish economist Eduardo Garzón, a long-time critic of Milei, believes that the president is directly responsible for the multimillion-dollar crypto scam:

Just three minutes after the project was created, the president of Argentina published a message on Elon Musk’s social network encouraging investment in it, assuring that all the money received would be dedicated to “encouraging the growth of the Argentine economy, funding small Argentine companies and enterprises.” This, in itself, is not only unethical, but constitutes a crime: the president of a state cannot encourage or announce any private investment due to the clear conflict of interest that this could entail.

Of course, following such recommendations, many people (especially young followers of the self-ascribed libertarian president who are familiar with cryptoassets, colloquially referred to as “cryptobros”) began to invest their savings in the Libra cryptocurrency, which skyrocketed in value in just a matter of a few hours. Some believed that they were multiplying their savings at breakneck speed, when in reality all they were doing was nurturing the few tokens issued by the project’s promoters: the most important of them (perhaps its promoter?) had half; The top 10 owners held 87% of the total, which is a very high concentration for this type of cryptocurrency (as developers usually account for 10-15% of the total).

A History of Supporting Dodgy Financial Schemes

When it comes to promoting dodgy financial schemes that end up imploding, Milei has form.

In 2021, just after being elected to Argentina’s Chamber of Deputies, he promoted CoinX on social media, a platform that promised high returns and was later denounced for fraud. At the time, the self-ascribed libertarian openly praised the company, describing it as a financial solution for Argentines struggling with inflation. However, a year later, Argentina’s National Securities Commission (CNV) banned its operations for lacking authorisation to offer investments. The collapse of CoinX left thousands of investors with millions of dollars in losses.

From Perfil (machine translated):

CoinX presented itself as an investment platform that guaranteed monthly returns in dollars of up to 8%, an extremely attractive proposition in the inflationary context that Argentina was going through in 2021. The company claimed to operate with automated trading algorithms to ensure consistent profits. However, experts in the financial sector warned that such rates were unsustainable and compared their operation to a Ponzi scheme.

“I had the pleasure of getting to know the offices of CoinX World and its team. They arerevolutionizing the way of investing to help Argentines escape inflation. From now on you can simulate your investment in pesos, dollars or cryptocurrencies and obtain a profit. Write them CoinX World on my behalf so they can advise you with the best,” Milei said in an Instagram post in 2021.

Shortly after, the CNV ordered the cessation of CoinX’s operations after determining thatit did not have authorization to operate in the financial market. In 2023, the company was denounced for fraud before the court of Judge Ariel Lijo and, that same year, the Federal Police raided 23 offices and homes linked to the firm in the City of Buenos Aires, the province of Buenos Aires and Santa Fe. Meanwhile, thousands of victims demanded the return of their investments.

Despite the impact of the case, Milei disregarded any responsibility. “I only gave my opinion,” he argued in an interview, and pointed out that he was paid for that opinion. When asked about the alleged scam, he explained: “The people at CoinX called me and asked me for a professional opinion. I asked them to show me how the business worked (…) and in that sense, the business had no problem.” However, he acknowledged that “they did not want to modify some issues that I was marking for them, and I decided not to continue doing things with them.”

Milei is not the only prominent political figure to have recently launched or promoted a meme coin. Donald Trump launched his own meme coin on January 17, three days before taking office. The coin’s market value peaked on January 19, at about $15 billion, and has since lost $11 billion of that “value”.

The US’ First Lady Melania Trump has also launched her own MELANIA/USD memecoin, which currently has a market cap of $632.79 million. According to an article in Benzinga, Blockchain analytics platform Bubblemaps has alleged a potential link between the teams behind MELANIA/USD and Milei’s $LIBRA coin:

What Happened: After a detailed analysis done in partnership with on-chain detective Stephen Findeisen, better known as Coffeezilla, Bubblemaps appeared “highly confident” that the creators of the two coins might be the same.

The investigation started with the tracking of sniper activity on MELANIA, which revealed a transfer of $2.4 million in sniped profits to a wallet linked to the creator of MELANIA.

Token sniping is a trading strategy that targets new token launches. It involves using automated trading bots to execute rapid transactions, gaining a competitive edge by acting faster than other market participants.

Further tracking revealed that the alleged MELANIA creator funded the creator of LIBRA, the token that was pumped and dumped after Milei’s endorsement during the weekend.

Bubblemaps alleged that the MELANIA creator also sniped the LIBRA token and made $6 million in profit. Moreover, the creator was also found to be involved in other pump-and-dump projects.

“The creator of MELANIA / LIBRA not only launched tokens to extract value but used insider knowledge to snipe them,” Bubblemaps said.

Meanwhile, Coffeezilla posted a video interview of him talking to Hayden Davis, one of the four creators of LIBRA, who can be heard admitting that he was part of Melania’s launch and sniped it.

 

It seems we may be at the dawn of a new age in which the plundering of people’s savings and wealth, promoted and facilitated by influential political movers and shakers in the emerging “libertarian” right, is more blatant. The fact that Trump is talking of unleashing crypto across the US economy should give serious pause. The governor of Buenos Aires province, Axel Kicilof, has described Milei’s involvement in this “multimillion-dollar $LIBRA scam, …in full view of the whole world” as “very, very serious”:

Milei has to explain to the country and to the courts who the fraudsters are and who benefited [from the scam]. It has to be made clear whether he and his entourage are among the fraudsters. The president of Argentina was part of a global fraud. It is a scandal and a disgrace. But, above all, it is a crime.

What could this mean for Argentina going forward?

For a start, this may be the end not only of Milei’s honeymoon period but of his presidency, and by extension his political career. All will depend on whether the Kirchenistas can mobilise enough cross-party support for impeachment. For the moment, former president Mauricio Macri, the leader of the centre-right PRO party and a vital ally of Milei’s, is refusing to back such a move, describing it as “opportunistic”.

Milei will probably still be able to count on a large groundswell of public support, even after scamming thousands of his own supporters. Ultimately, there will probably be a big difference between what should happen and what will happen. After all, securing a conviction will mean having to prove that Milei acted in bad faith, and that will probably be easier said than done, particularly in a justice system as corrupt as Argentina’s.

If what Milei currently claims is true, that he was essentially duped into participating in this criminal entreprise, which I do not believe for a minute, then he is clearly not competent enough for the role he occupies. This, after all, is a man who prides himself on being a “professional economist” who knows more about economics and finance than any other Argentine politician, yet he claims to have blithely offered his endorsement to a naked pump-and-dump scheme, in flagrant violation of Argentine law.

If the alternative is true, that Milei knowingly participated in a financial scam that targeted investors not only in Argentina but the world at large, which seems the most logical conclusion, Milei should be removed from office as swiftly as possible, before he can do any further damage to a country that has already suffered enough through the rank incompetence and corruption of its political class.

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19 comments

  1. karma fubar

    Respectfully requesting an edit. In paragraph 3, “shot up from three dollar cents at the start of trading” should instead be “three cents”.

    Reply ↓
  2. rick shapiro

    You have repeatedly called the losers “investors”. They were no such thing; they were speculators hoping to find a bigger fool, just like the initiating scammers. While it is certainly true that Milei is criminally responsible, I have little sympathy for those “investors”.

    Reply ↓
    1. Michael Fiorillo

      While I agree with you that people who put money in this scam deserve little or no sympathy, even calling them “speculators” is too kind.

      As I understand the term, to speculate, in the sense of actively participating in markets, implies investment in an entity that has some economic utility, if only hypothetical. A meme coin, by definition, has none; it’s a zero sum exercise, with every cent of insider profit representing a cent’s loss by the marks who “invested,”

      Not trying to be pedantic, but from a rhetorical perspective, better to call these people gamblers, wasting time and money on a rigged, non-productive game.

      Reply ↓
  3. The Rev Kev

    Maybe those gamblers, errr, investors would have done better in investing in the Hawk Tuah coin ($Hawk). People rave about these coins but Luddite that I am, I can see little difference between these coins and dodgy stocks used in “pump and dump” schemes. Some coins/stocks are popular and some coins/stocks fall out of favour rapidly. It is like a popularity contest. So why did Milei do this? It could be simple greed where he wanted to make some fast bucks. But my own idea is that this was a way of paying off supporters that were actually insiders to his regime. People he owed financial favours to. He tells them privately he is going to launch this dodgy coin giving them time to invest in it and a few hours later cash out with their winnings free and clear leaving the rest to the suckers. I bet that there would be a lot learned by seeing who bought in the first several hours and then sold out before the price plummeted.

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    1. ciroc

      Or perhaps it was a ploy to circumvent the law that regulates foreign donations to Argentina’s president and his cronies.

      Reply ↓
      1. Trogg

        Con artist Hayden Davis admitted on video to what sound like jailable offenses, on this deal and Trump’s. If he’s properly interrogated, a lot of skeletons could fall out of the closet. And if avoids the interrogation room, that says a lot about the state of financial law enforcement.

        Reply ↓
  5. t

    If Milei is willing to facilitate the plunder of not only his own citizens but his own fan base in the broadest of possible daylight, what else is he capable of?

    That “what else” is beyond my imagination.

    I expect Coffeezilla has some thoughts, to be delivered in his comforting mien.

    Reply ↓
  6. Skk

    This is a well researched story / story aggregation article that also states Nicks withering conclusions re: Millei. Great stuff. I follow crypto , not shitcoins in particular but both this one, and the Trump and Melania official, there’s no other word for it they are official alright , shitcoins has me dumbstruck.
    They are either fools or knaves. In either case I look at everything they do with a deeply jaundiced eye.

    Meantime, Trump shitcoin trades today at 16, down from an all-time high of 75, Melania at 1.23 down from the all-time high of 11.53 .

    Reply ↓
  7. old ghost

    OK. I am an elderly person. For well over a decade now I have heard my Libertarian friends talking about how wonderful these Crypto-coin things were. I have always asked them: you don’t trust government issued fiat paper money, why the (family-blog) do you think this crypto that does not even have a physical existence has (or will hold) any value whatsoever?

    The answers I get are that it is private issue, and only a limited amount will be created. That it is a supply and demand free market thing. Never mind that if the electricity goes out it becomes useless. Or that there may not be a bigger fool around when you need to sell it.

    The only utility to it seems to be for gambling, and shady politicians. Politicians can issue their own crypto, and receive money from buyers who otherwise could not bribe them.

    There also seems to be something of a mania. Like the Dutch tulip mania of the 1630’s. But without the pretty flowers. I don’t see a happy ending for Crypto.

    Reply ↓
    1. alrhundi

      I think it is here to stay with how much it is being integrated into finance. In my opinion it sort of represents continuation of hyper-financialization and free market ideology. If you look at the discourse around it at the WEF and by other financial powers, the current idea is to “tokenize” assets meaning to essentially create crypto-coins of different financial assets that can interact with blockchains and smart contracts. In a way it isn’t much different from how markets currently work but it will allow for more flexibility.

      There are definitely a lot of scams and risks as you outlined but the technology does allow for a lot of innovation in the finance sector.

      Bitcoin offers an interesting alternative to gold that has a similar function with less dilution. There’s an interesting article by Lyn Alden that discusses this in relation to gold and other stores of wealth.

      It’s been really useful for people in countries that don’t have a stable currency or that don’t have access to financial institutions as well. Nigeria is an example where a large percentage of people use cryptocurrencies.

      Reply ↓
  9. Jason

    It seems that Milei, like many so-called Libertarians, wants so much to believe in crypto that they he doesn’t think twice before endorsing these schemes. I don’t believe (until further evidence shows) that he’s personally benefiting from the scam.

    Reply ↓
    1. duckies

      If he is not personally benefiting from the scam, that does not make his actions less harmful, or him look any better.

      Reply ↓

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