Trump and Cryptocurrency

I have found Molly White's "[citation needed]" newsletter to be an essential source of information about developments in the cryptocurrency industry. Last week, she titled her newsletter, "Trump’s newest grift: Building a cryptocurrency empire while destroying its regulators" and devoted the entire publication to the involvement of cult leader, convicted felon, and failed President Donald Trump in various aspects of cryptocurrency. I imagine that few understand exactly how involved Trump is with crypto or the corruption that goes along with it. As such, it is probably worth providing an overview of White's report.

What White documents is essentially a crime spree. On the one hand, Trump has used his authority within the government to remove the few regulations and regulators that existed with regard to cryptocurrency. On the other hand, Trump has exploited nearly every opportunity that the new "wild west" crypto environment provides. As White writes, Trump and his family are "set to profit precisely because Trump is gutting the regulations that would normally constrain it". She then goes on to say:

"These projects don’t just generate direct profits — they create new opportunities for outside interests to gain favor through cryptocurrency ‘investments’ that would be illegal as campaign contributions. The timing and scope of these developments clearly demonstrate that federal policy is being weaponized for personal profit."

White catalogs a long list of crypto industry participants who have made significant contributions that benefit Trump and, in return, have received favors from the administration. For instance, Andreessen Horowitz contributed $70 million to political action committees focused on cryptocurrency and an additional $5.35 million to Trump super PACs. Four Andreessen Horowitz employees were later installed in positions of influence in the White House. Ripple may have made one of the best investments. The company contributed $5 million to Trump's inauguration fund. Trump's Security and Exchange Commission then stayed an enforcement case against the firm and returned $75 million from a previous SEC fine. White's list of crypto firms that made contributions to Trump and then had SEC cases dropped is quite lengthy.

I pay quite a bit of attention to the news, especially news related to Trump. But I was not previously aware of World Liberty Financial, a cryptocurrency company that Trump co-founded with Zach Witkoff, the son of Steven Witkoff. The elder Witkoff is Trump's envoy to the Middle East but has been the de facto Secretary of State while Marco Rubio has busied himself deporting students. Trump has a 60% stake in the company. White says that World Liberty has recently announced its own "stablecoin", despite earlier warnings by Trump about such cryptocurrencies. According to White, World Liberty recently "raised $550 million in its initial $WLFI token sale, putting Trump’s 75% cut at almost $400 million." $75 million of that came from Justin Sun, a crypto entrepreneur who is a foreign national and, therefore, not able to contribute to Trump's campaign. However, after this investment, an SEC case against Sun was stayed. Just 10 days after World Liberty announced its stablecoin, Trump's SEC "published a statement declaring that ‘covered’ stablecoins fall outside its authority, and that companies issuing stablecoins need not register." As a result, Trump's stablecoin will essentially have no oversight. White also notes that World Liberty has been negotiating with the cryptocurrency giant Binance about listing Trump's stablecoin on its platform — a deal that would be extremely profitable to World Liberty at the same time that Binance is in talks with the Treasury Department to lighten the terms of an earlier guilty plea.

Trump Media & Technology Group, the company that owns the Truth Social social media platform, recently launched Truth.Fi to focus on "America First investment vehicles". Last month, Trump Media announced a partnership with Singapore-based Crypto.com. It is interesting that an "America First" investment started out with an alliance with a company in Singapore. At the time of the announcement, Crypto.com was under SEC investigation. Three days later, that investigation was dropped. TMTG also announced that it would invest up to $250 million in cryptocurrencies, an investment that stands to grow as a result of Trump's own actions in the White House to pump crypto prices.

White also refers to a "Fortune" report that Trump plans to release a real estate-themed game similar to Monopoly but using cryptocurrency rather than fake money. White says that:

"Since his inauguration, Trump has been hard at work bulldozing regulatory or legal barriers for crypto companies that could require registration with financial regulators, more burdensome oversight, customer support programs and recourse for players whose in-game and/or crypto assets are stolen, and limits on gambling mechanisms in games — all things that would cut into crypto gaming companies’ profits."

Therefore, once again, Trump is using the power of his presidency in a way that will personally benefit his own crypto initiatives.

One of the stranger investments that White described involved bitcoin mining. Trump's sons, Eric and Donald Jr. invested in a company named American Bitcoin, which, in turn, acquired the assets of the existing bitcoin mining firm Hut8. Hut8 had previously owned 100% of its bitcoin mining assets but exchanged them for an 80% stake in American Bitcoin, something that on the face of it doesn't make much sense. But, as White concludes, "It seems to me that Hut8 determined a 20% donation to the Trump family was worth the benefits of getting looped into the Trump crypto empire."

The Trump family has also launched the $TRUMP and $MELANIA memecoins. Memecoins are fascinating to me because they seem to be nothing more than a mechanism for someone with a high profile to cheat their most devoted fans. For example, Haliey Welch, the so-called "Hawk Tuah Girl", launched her own $Hawk memecoin that reached a market capitalization of nearly $500 million within 15 minutes of its launch. However, it then lost 95% of its value the next day when insiders sold off coins that they had been given in what appears to have been a "rug pull". Welch reportedly made $50 million from the deal. In the case of the $TRUMP memecoin, White notes that "While memecoin valuations are challenging to calculate accurately, the Financial Times estimated in early March that he [Trump] and his team had profited at least $350 million from the stunt." Trump-owned tokens are subject to an unlocking schedule, and the first unlock is nearly here. $TRUMP, which once sold for as much as $75, now sells for less than $5. However, $TRUMP is probably a good investment for those seeking favors from the President. Moreover, like other cryptocurrency ventures, this one will probably be free from government oversight given that Trump controls those who might otherwise provide such oversight.

If memecoins are simply ways to cheat your fans and/or provide a legal means for bribery, NFTs are much the same, but even more stupid. Melania Trump got into NFTs first, starting back in 2021. However, Melania appears not to have been successful and, according to White, may have actually purchased her NFT herself after there were no buyers. White says that Trump was somewhat more successful.

The Trump family has millions of dollars of cryptocurrency holdings, though White says the exact value is hard to determine. The value of these holdings is, of course, impacted by Trump's policies. But White also suggests that there are considerable opportunities for insider trading. She also notes an occasion on which Eric Trump appears to have attempted to influence the value of $ETH, potentially in a way that would benefit him and his family.

One of the most insidious ways that Trump has been acting is the tendency of the SEC to stay investigations or enforcement actions coincidentally with the targets of those actions making crypto deals with Trump. It appears that cutting a crypto deal with Trump is essentially a "get out of jail free" card for crypto firms facing investigations. However, an investigation that is stayed can always be reopened. Therefore, making a deal with Trump is a bit like making a deal with the Mafia. Once you are involved, you can't get out. If Trump ever decides to shake down one of these firms for another few million dollars, he can simply suggest that the investigation might be reopened otherwise. These firms are putting their futures in Trump's hands.

As White says, "The scope of the Trump family’s cryptocurrency conflicts illustrates a degree of corruption that makes the emoluments concerns of Trump’s first term seem quaint by comparison." Trump has widespread investments in crypto, the value of which he can influence through government policies. There are clear conflicts of interest. Moreover, the crypto vehicles provide avenues for enriching Trump in exchange for favors. It might be unseemly to hand Trump a paper bag full of $100 bills, but one can easily invest in a memecoin, NFT, or Trump's stablecoin. Moreover, with Trump stripping oversight and enforcement within the industry, it is unlikely that anything illegal will be caught.