The
‘Crypto Punks’ Behind Trump’s Murky New Business Venture
The serial
entrepreneurs behind Donald J. Trump’s new cryptocurrency project have left a
trail of lawsuits, unpaid debt and tax liens.
By Sharon
LaFraniere and David Yaffe-Bellany
Oct. 7, 2024
Updated
11:36 a.m. ET
https://www.nytimes.com/2024/10/07/us/politics/donald-trump-crypto-2024-campaign.html
Chase Herro
is an online salesman who proudly calls himself a “dirtbag of the internet,”
able to sell anything to anyone. Zachary Folkman ran a company called Date
Hotter Girls, offering advice under a pseudonym on how to pick up women at
bars.
For the past
decade or so, the two men have been serial entrepreneurs, leaving behind a
trail of lawsuits and unpaid debt and taxes.
Now they are
former President Donald J. Trump’s business partners.
Mr. Herro
and Mr. Folkman are the forces behind World Liberty Financial, a cryptocurrency
venture that Mr. Trump and his three sons announced on a livestream last month.
The Republican presidential candidate declared his new enterprise would help
turn the United States into “the crypto capital of the world.”
His eldest
son, Donald Trump Jr., said Mr. Herro and Mr. Folkman would help engineer a
financial revolution based on digital dollars. “You could put them in a
boardroom at Goldman Sachs, and they’re going to smoke the people in the room,”
he said.
Other crypto
experts have expressed doubt, even alarm, about the business, the former
president’s involvement and his partners. Eswar Prasad, an economics professor
at Cornell University, said Mr. Herro and Mr. Folkman did not appear to have
the technical or financial savvy to make the venture work.
The concept
behind it, which was pitched as groundbreaking, seemed similar to other
existing crypto ventures, said John Reed Stark, a former senior official with
the Securities and Exchange Commission.
“It’s a
bunch of nonsense, and a terrible opportunity for investors,” he said.
For Mr.
Trump, the project is part of an extraordinary effort to mix his personal
finances with his bid to return to political power. Mr. Trump campaigns daily
on a social platform owned by the Trump Media & Technology Group. Since he
announced his new election effort, he has sold silver coins, Bibles, gold
hightop sneakers, digital trading cards and, as of last week, diamond-encrusted
watches, all branded with his name, image or campaign themes.
Like his
social media company, his new crypto business stands out for its potential
conflicts of interest. If Mr. Trump is elected, he would be in a position to
influence the regulations that could determine whether World Liberty Financial
succeeds or fails. Mr. Trump has already said he opposes strict federal
intervention in the industry, which now operates in a legal gray area.
Even the
project’s leaders sounded a little incredulous that the presidential candidate
was jumping into a partnership with two little-known 39-year-olds in a
high-risk industry just before Election Day.
“If you
would have thought six months ago that Donald Trump is dropping a decentralized
finance project, would anyone have believed it?” Mr. Folkman asked on the
livestream announcing the project. Especially, the event’s moderator added,
“with two crypto punks.”
A Trump
campaign spokesman did not respond to a request for comment. Asked about the
company’s plans, Jim Redner, who was hired in September as World Liberty
Financial’s spokesman, said he had just quit. Mr. Herro, Mr. Folkman and World
Liberty Financial did not respond to requests for comment.
Trump’s
Evolution
As recently
as 2021, Mr. Trump himself said crypto “seems like a scam.” The F.B.I. has said
it is riddled with pervasive fraud that cost Americans billions of dollars last
year alone.
But Mr.
Trump’s views started to change, he said last month, after he discussed the
technology with his sons, who were enthusiastic about its potential.
World
Liberty Financial first took shape about nine months ago, when Mr. Herro and
Mr. Folkman were connected to the Trump family through Steve Witkoff, a real
estate developer, and his son, Zachary, an investor in crypto projects.
Mr. Witkoff
is a close friend of Mr. Trump’s and a donor to a pro-Trump political action
committee. He testified for Mr. Trump in the former president’s civil fraud
trial in New York this year, and was playing golf with Mr. Trump during the
latest attempt on the former president’s life.
Mr. Witkoff
is no crypto expert — he mispronounces the word “memecoin,” a type of digital
currency, as “me me coin,” according to a person who requested anonymity to
describe a private conversation. But he believed the project would be good for
the youngest Trump son, Barron, an 18-year-old college freshman, giving him
business experience and steering him away from more scam-ridden segments of the
crypto industry, the person said.
The
company’s promotional materials, reviewed by The New York Times, called Barron
a crypto “visionary.”
Its business
model remains murky. One person involved in the business, who spoke on the
condition on anonymity to discuss the private planning, said the platform would
facilitate borrowing and lending in cryptocurrencies. The promotional materials
say the company isn’t owned or managed by Mr. Trump, the Trump Organization or
Trump family members, though they may receive compensation.
Serial
Entrepreneurs
Mr. Herro
and Mr. Folkman have a history of jumping from project to project. Together or
separately, they have formed at least 17 companies, gravitating to the U.S.
Virgin Islands and Puerto Rico, both tax havens.
Their
ventures have largely involved social media marketing and selling advice on how
to get rich quick through e-commerce or crypto. One 2021 podcast featuring Mr.
Herro hit a typical theme: “From Broke to Millionaire in 14 Days.”
Both men
were involved in Dough Finance, a crypto platform that was hacked in July,
according to a person who spoke on the condition of anonymity because he was
not authorized to discuss the situation. A vulnerability in the project’s code
led to the theft of $2 million. “I lost a lot,” one customer wrote on social
media. “Hard to sleep at night.”
Mr. Herro,
who sometimes spells his last name as Hero, has made a rags-to-riches tale part
of his pitch. As a teenager, he was convicted of theft and marijuana possession
and spent nearly two weeks in a Wisconsin jail for probation violations. He has
said he cut off his ankle bracelet and fled as a felon to California, although
Wisconsin records show his offenses were misdemeanors.
His problems
continued. Two cars were repossessed. His landlord sued to evict him. An
investor in a medical marijuana dispensary he partly or wholly owned claimed
fraud and won a $207,000 court judgment.
His
girlfriend left him after he demanded she get an abortion and told her she
would look fat in a swimsuit, he has said.
“I was a bad
human being,” he said on a podcast in 2019.
In his
telling, everything changed when he discovered social media marketing and made
his first million within months. “All the bad things about me are from like,
10, 11 years ago,” he has said.
But the
turnaround wasn’t complete: In 2015, he missed the birth of his second child,
he later said, because he was tripping on LSD in Puerto Rico. He paid $79,000
in federal back taxes in 2016, but only after the authorities filed a lien.
California tax liens, filed in 2018 and 2019 for a total of $281,000, remain on
the books, according to state officials.
It’s unclear
when Mr. Herro met Mr. Folkman. A Skidmore College graduate, Mr. Folkman
founded Date Hotter Girls in his 20s, offering dating advice under the
pseudonym Zack Bauer. “You’re going to be ripping their clothes off and
throwing them up against the wall,” he promised in a 2011 seminar.
Two years
later, the two men started the Nexus Group, which sold advertising on social
media websites. By 2016, they were living together in a $12,000-a-month
oceanside villa in the U.S. Virgin Islands. The property owners later claimed
that they had skipped out on $36,000 in rent and caused $75,000 in damage. The
lawsuit was settled in 2019.
The Nexus
Group also ran into legal trouble. In 2017, a client sued, claiming the company
had failed to provide the promised services, a complaint that was later
withdrawn. A few years later, American Express sued the group and Mr. Folkman
for $77,000 in unpaid credit card bills. The credit card company lost the case
after missing a filing deadline. Mr. Folkman also owes $7,300 in taxes to
California, according to state records.
Mr. Herro
claimed in a 2019 interview that he had been wildly successful, generating more
than $700 million in e-commerce sales. In 2021, he bought a $7 million home in
Boca Raton, Fla.
In 2020, Mr.
Herro and Mr. Folkman started a new business in Puerto Rico — Subify, a
subscription-based platform meant to connect online creators with their fans.
One client claimed the website Subify had created crashed on launch day and
customers’ account information had disappeared; Subify sued the client for
nonpayment.
In a court
filing last month, a lawyer for Subify said the firm was winding up its
business. Like the Nexus Group, it has been officially dissolved, corporate
records show.
A Shift to
Crypto
Mr. Herro
and Mr. Folkman began laying the groundwork for their turn to crypto years ago.
Mr. Herro ran a crypto trading firm called Pacer Capital in the U.S. Virgin
Islands, and over the years, he and Mr. Folkman have evangelized about the
technology.
In April
2022, Mr. Herro led a seminar on crypto at the home of Jordan Belfort, who
defrauded more than 1,500 financial clients and whose memoir inspired the 2013
movie “The Wolf of Wall Street.”
Mr. Herro
told the group he was a fan of the cryptocurrency TerraUSD, calling it “one of
the coolest assets in history.” The next month, Terra’s price collapsed
overnight, setting off an industrywide implosion that erased billions of
dollars in savings and forced several high-profile companies into bankruptcy.
As they
announced World Liberty Financial last month, Mr. Trump and others involved in
the project declared they had unbridled confidence in the effort. Mr. Herro
described the firm’s goals in the loftiest terms — nothing less than harnessing
the power of crypto to restructure trillions of national debt.
Mr. Witkoff,
the developer, said that Mr. Herro and Mr. Folkman were “as smart as any
currency traders I’ve ever met.”
Laura N.
Pérez Sánchez and Matthew Goldstein contributed reporting. Kitty Bennett, Susan
C. Beachy and Alain Delaquérière contributed research.
Sharon
LaFraniere is an investigative reporter currently focusing on Republican
candidates in the 2024 presidential election. More about Sharon LaFraniere
David
Yaffe-Bellany writes about the crypto industry from San Francisco. He can be
reached at davidyb@nytimes.com. More about David Yaffe-Bellany
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