Trump’s
Crypto Venture Divides the Industry He Aims to Support
The
president’s promotion of a speculative digital coin left some crypto investors
feeling blindsided, while others saw it as a gimmick that undermined the
industry’s credibility.
David
Yaffe-BellanyEric Lipton
By David
Yaffe-Bellany and Eric Lipton
Jan. 25,
2025
Dressed in
ball gowns, tuxedos and “Make Bitcoin Great Again” baseball caps, a crowd of
some of the country’s most powerful cryptocurrency executives gathered a few
blocks from the White House for a lavish party three days before President
Trump’s inauguration, toasting an incoming administration that had vowed to
promote the industry’s interests.
Even Snoop
Dogg joined the festivities, offering a rendition of “Don’t Stop Believin.’”
But the
crypto millionaires and billionaires were caught off guard by what happened
next.
At 9 p.m. on
Jan. 17, with the festivities in full swing, Mr. Trump announced on social
media that he was launching a new cryptocurrency — a so-called memecoin known
simply as $Trump.
The surprise
disclosure raised fresh ethics and legal concerns about the ways in which Mr.
Trump continues to cash in on his power and fame, in this case by marketing a
digital asset in an inherently volatile and speculative market to millions of
his followers.
And it set
off a wave of criticism from inside the industry that he says he wants to
champion.
Crypto
executives criticized the move as a cash grab, saying that Mr. Trump had
undercut the industry’s credibility at the very moment when proponents were
seeking a more prominent place for digital currencies in mainstream finance and
business.
His venture,
they said, created a brief and highly publicized bubble that partly deflated
within a few days even as Mr. Trump’s family and its business partners
collected millions of dollars from fees on purchases and sales of the coin.
“It makes it
all look corrupt and self-interested,” said Nic Carter, a vocal supporter of
Mr. Trump who runs the crypto investment firm Castle Island Ventures and was at
the Crypto Ball as the new $Trump coin was announced.
An analysis
by the crypto forensics company Chainalysis showed that the majority of people
who bought $Trump were likely inexperienced retail investors, possibly dabbling
in crypto for the first time. These traders “roughly broke even,” the analysis
said, though more than 100,000 of them lost money.
Yet by one
estimate, the launch of $Trump generated $58 million in fees for the Trump
family in less than a day. As of Friday night, the family also owns, at least
on paper, $23 billion worth of $Trump at its $29 price — already a 60 percent
drop from the peak. That price would crash even further if the family did a
so-called rug pull and moved to rapidly sell off its holdings.
Asked about
the coin’s launch on Tuesday at the White House, Mr. Trump said, “I don’t know
much about it.”
But even
after the inauguration, he continued to repost the celebratory announcement of
the $Trump token — effectively urging more people to buy the coin after its
price collapsed.
Ryan Selkis,
a crypto entrepreneur who was one of the president’s earliest supporters in the
industry, said on social media that the memecoin episode would cost the Trump
administration “a lot of $ and goodwill.”
“Trump needs
to fire his crypto advisors, from top to bottom and replace with people who
know what they are doing,” another crypto executive, Gabor Gurbacs, wrote on X
after the coin’s price plummeted.
The memecoin
launch was the first time the Trump family had issued a digital currency that
any investor could buy or sell on crypto exchanges. But the plan, one Trump
Organization executive said, grew out of an earlier effort organized in part by
Bill Zanker, a serial entrepreneur and friend of Mr. Trump’s who has previously
sold back rubs, gym equipment and self-help courses.
Mr. Zanker
and the Trump family began selling $99 digital trading cards in 2022 depicting
Mr. Trump as a superhero in a crypto-based format known as a nonfungible token,
or NFT.
But NFTs, at
least in theory, serve as digital artwork or collectibles, whereas the Trump
token was treated by buyers more like GameStop shares, the so-called meme stock
that many amateur traders bought in recent years in hopes of earning a quick
profit.
A onetime
crypto skeptic, Mr. Trump embraced the industry on the campaign trail last
year, promising to end the Biden administration’s regulatory crackdown on
crypto firms.
“We’re going
to make a lot of money for the country,” Mr. Trump said on Thursday as he
signed an executive order at the White House pledging to promote the crypto
industry.
It’s a
business in which Mr. Trump has a substantial personal stake. In September, he
and his sons helped start World Liberty Financial, a company designed to
facilitate borrowing and lending in digital currencies.
And since
his election victory, Mr. Trump has made a series of personnel selections at
regulatory agencies that seem poised to help the industry.
In an
interview on Friday, Eric Trump, the president’s middle son, dismissed
criticism of the decision to release the $Trump tokens and questions about
whether it was a conflict of interest for the Trump family to be introducing
its own digital currency while President Trump is appointing financial
regulators.
“The $Trump
trading card and World Liberty Financial are two of the most successful
projects in crypto history,” he said.
The Crypto
Ball was promoted as a celebration of the industry’s political success — the
sort of party that crypto enthusiasts usually throw on yachts and beaches, just
transplanted to an auditorium a 15-minute walk from the White House.
It was also
an opportunity for top crypto executives to network with some of the most
influential figures in Washington. Fred Thiel, the chief executive of the
Bitcoin mining firm Mara Holdings, chatted with House Speaker Mike Johnson, who
sent a text to President Trump right in front of him. “Everyone was very
pumped,” Mr. Thiel said in an interview.
But it
turned out the most important action in the crypto market was happening on
social media. “Trump Meme is HERE!” Mr. Trump wrote on Truth Social and X as
Snoop Dogg took the stage. “It’s time to celebrate everything we stand for:
WINNING!”
Proponents
of digital currencies say they can grow into a widely used means of exchange,
allowing instant transfers of wealth efficiently and privately, outside the
traditional banking system. Memecoins, a type of digital currency based on a
joke or a celebrity mascot, are controversial in the crypto world. They have no
practical utility and are often deployed in pump-and-dump schemes or other
scams.
But traders
with good instincts can generate quick profits — if they buy quickly as the
price is rising and then sell their holdings before earlier buyers cash out.
Josh Bailey,
a crypto trader in Austin, Texas, saw Mr. Trump’s announcement almost
immediately after it was posted. At first, he wasn’t sure if it was real. “The
president of the United States launching a memecoin,” Mr. Bailey said. “I was
not expecting that.”
Soon the
coin’s price was surging. Within a few hours, the total value of all the $Trump
in circulation was more than $5 billion. Mr. Bailey decided to put in $12,000.
By the time he cashed out, his trove had more than quintupled in value.
By Sunday
morning, Mr. Trump’s coin was among the most valuable cryptocurrencies in the
world, and his partnership’s holdings were worth more than $50 billion on
paper. A business entity controlled by Trump Organization and its partners
owned 80 percent of the coins and collected fees as the coins were traded.
Eric Trump,
in a social media post, hailed the new investment as “the hottest digital meme
on earth.”
Already,
though, Mr. Trump’s crypto supporters were growing frustrated. Many of the
people who attended the Crypto Ball were effectively cut out of the moneymaking
opportunity, unable to buy the coin early enough to profit because they were
out partying rather than online.
“I’m
legitimately heated about it,” Mr. Carter said. “Why wouldn’t they just do an
announcement over the speakers?”
Then, on
Sunday afternoon, a post appeared on Melania Trump’s X account: She was
launching a memecoin of her own, essentially creating a competitor in the
market. The price of $Trump plummeted by 60 percent over the next day.
Suddenly,
the industry’s enthusiasm for Mr. Trump turned to fury.
Justin Bons,
a crypto executive, said the back-to-back memecoin announcements were “nothing
more than blatant money grabs.” Another trader said he was “missing Gary
Gensler right now,” a reference to the former Securities and Exchange
Commission chair who filed numerous lawsuits against crypto companies.
The new
Trump token also quickly generated legal questions, centering on whether it
constituted a security and should have been subject to federal disclosure and
registration requirements.
The $Melania
tokens “are digital collectibles,” the family said as it announced the
offering, “not intended to be, or to be the subject of, an investment
opportunity.” But trading patterns show that this was not how buyers treated
these tokens — buying and selling them in most cases in an effort to make
money.
During the
Biden administration, the S.E.C. under Mr. Gensler adopted an aggressive
posture toward cryptocurrencies, arguing that the vast majority of them were
securities that should be closely regulated.
In 2023, the
S.E.C. accused the backers of a cartoon NFT series called Stoner Cats of
selling an unregistered security after the images were marketed in a way that
“led investors reasonably to expect to profit from the managerial and
entrepreneurial efforts of” the backers.
Allison
Herren Lee, a former S.E.C. commissioner, said that during her tenure the new
Trump-family coins would certainly have generated a staff review to evaluate if
they complied with the law.
“That
analysis does not turn on whether the promoters call it a security,” she said.
“It turns on whether it’s marketed as an investment, meaning generally that
purchasers will get a return based on the efforts of others.”
Democrats in
Congress, including Senator Elizabeth Warren of Massachusetts, have already
written a letter to federal regulators asking them to investigate the matter.
But opening
such an inquiry now would effectively require the S.E.C. to investigate the
family of a president who just nominated the agency’s chairman — an experienced
securities lawyer with close ties to the crypto industry.
David Sacks,
a venture capitalist whom Trump appointed to oversee his administration’s tech
policy, said this week that the coin was “like a baseball card or a stamp” and
“totally fine” to sell.
It is
already clear that some of the buyers of the $Trump token jumped too slowly and
ended up losing money. During one series of trades, an investor using the
pseudonym Ansem spent $9 million in cryptocurrency to buy $Trump just before it
fell in value, and then sold the holdings two hours later at a roughly $2
million loss, according to public transaction records first identified by an
account called Lookonchain.
Still, over
the next few days, the Ansem account continued trading $Trump, the records
show, perhaps in hope of making up the loss.
David
Yaffe-Bellany writes about the crypto industry from San Francisco. He can be
reached at davidyb@nytimes.com. More about David Yaffe-Bellany
Eric Lipton
is an investigative reporter, who digs into a broad range of topics from
Pentagon spending to toxic chemicals. More about Eric Lipton
See more on:
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