Dressed in ball gowns, tuxedos and “Make Bitcoin Great Again” baseball caps, a crowd of some of the most powerful cryptocurrency executives gathered a few blocks from the White House for a lavish celebration three days before President Trump's inauguration, with they toasted a new government. who had promised to represent the interests of the industry.
Even Snoop Dogg joined in on the festivities, offering a rendition of “Don't Stop Believin.”
But the crypto millionaires and billionaires were blindsided by what happened next.
On January 17 at 9 p.m., 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 revelation raised new ethical and legal concerns about the ways in which Trump continues to capitalize 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 caused a wave of criticism from the sector that he says he wants to defend.
Top Crypto executives criticized the move as a cash grab, saying Mr. Trump had undermined the industry's credibility at a time when proponents were looking for a more prominent place for digital currencies in mainstream finance and business.
His venture, they said, created a short, highly publicized bubble that partially deflated within a few days, even as Trump's family and his business associates collected millions of dollars in fees from buying and selling the currency.
“It makes it all look corrupt and self-serving,” said Nic Carter, an outspoken supporter of Mr. Trump who runs the crypto investment firm Castle Island Ventures and was at the Crypto Ball when the new $Trump coin was announced.
An analysis by crypto forensics firm Chainalysis found that the majority of people who bought $Trump were likely inexperienced retail investors, who may be new to crypto. These traders “roughly broke even,” the analysis said, although more than 100,000 of them lost money.
But by one estimate, $Trump's launch generated $58 million in fees for the Trump family in less than a day. As of Friday evening, the family also owns, at least on paper, $23 billion worth of Trump at the price of $29 – already a 60 percent drop from the peak. That price would drop even further if the family were to do a so-called 'back pull' and quickly sell its assets.
Asked about the coin's launch at the White House on Tuesday, 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, essentially encouraging more people to buy the coin after its price collapsed.
Ryan Selkis, a crypto entrepreneur who was one of the president's early supporters in the industry, said on social media that the memecoin episode would cost the Trump administration “a lot of dollars and goodwill.”
“Trump should fire his crypto advisors from top to bottom and replace them with people who know what they are doing,” another crypto manager, Gabor Gurbacs, wrote on X after the coin's price plummeted.
The launch of memecoin marked the first time the Trump family had issued a digital currency that any investor could buy or sell on crypto exchanges. But the plan, a Trump Organization executive said, grew out of an earlier effort organized in part by Bill Zanker, a serial entrepreneur and friend of Mr. Trump who has previously sold back massages, fitness 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 non-fungible token, or NFT.
But NFTs serve, at least in theory, as a digital work of art or collectible, while the Trump token was treated by buyers more like GameStop shares, the so-called meme stocks that many amateur traders bought in recent years in hopes of making a quick profit.
Once a crypto skeptic, Trump embraced the sector during his campaign last year, promising to end the Biden administration's regulatory crackdown on crypto companies.
“We're going to make a lot of money for the country,” Trump said Thursday as he signed an executive order at the White House pledging to promote the crypto industry.
It is a venture in which Mr. Trump has a significant personal stake. In September, he and his sons helped found World Liberty Financial, a company designed to facilitate borrowing and lending in digital currencies.
And since his election victory, Trump has made a series of personnel selections at regulatory agencies that appear 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 create its own digital currency. introduce while President Trump does so. appointing financial supervisors.
“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 kind of party crypto enthusiasts usually throw on yachts and beaches, simply transplanted to an auditorium a 15-minute walk from the White House.
It was also a chance for top crypto executives to network with some of the most influential figures in Washington. Fred Thiel, the CEO of Bitcoin mining company Mara Holdings, chatted with House Speaker Mike Johnson, who texted President Trump right before him. “Everyone was very excited,” Mr. Thiel said in an interview.
But it turned out that the main action in the crypto market took place on social media. “Trump meme is HERE!” Mr. Trump wrote about Truth Social and X when Snoop Dogg took the stage. “It's time to celebrate everything we stand for: WINNING!”
Proponents of digital currencies say they could become a widely used medium of exchange, allowing direct transfers of wealth efficiently and privately, outside the traditional banking system. Memecoins, a type of digital currency based on a joke or celebrity mascot, are controversial in the crypto world. They have no practical use and are often used in pump-and-dump schemes or other forms of scams.
But traders with good instincts can make a quick profit – if they buy quickly as the price rises and then sell their holdings before previous buyers have cashed 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 is launching a memecoin,” Mr. Bailey said. “I didn't expect that.”
Soon the price of the coin rose. Within a few hours, the total value of all $Trump in circulation exceeded $5 billion. Mr. Bailey decided to put down $12,000. By the time he cashed out, his value had increased more than fivefold.
As of Sunday morning, Trump's coin was among the most valuable cryptocurrencies in the world, with his partnership's assets worth more than $50 billion on paper. A corporate entity controlled by the Trump Organization and its affiliates owned 80 percent of the coins and collected fees as the coins traded.
Eric Trump called the new investment “the world's most popular digital meme” in a social media post.
But Trump's crypto supporters were already growing frustrated. Many of the people who attended the Crypto Ball were essentially locked out of the opportunity to make money because they couldn't buy the coin early enough to make a profit because they were partying instead of online.
“I'm right to be excited about it,” Mr. Carter said. “Why wouldn't they just make an announcement over the loudspeakers?”
Then on Sunday afternoon, a message appeared on Melania Trump's X account: she was launching her own memecoin, essentially creating a competitor in the market. The price of $Trump plummeted 60 percent the next day.
Suddenly, the industry's enthusiasm for Trump turned to anger.
Justin Bons, a crypto manager, said the successive memecoin announcements were “nothing more than blatant cash grabs.” Another trader said he was “missing Gary Gensler right now,” a reference to the former chairman of the Securities and Exchange Commission who filed numerous lawsuits against crypto companies.
The new Trump token also quickly sparked legal questions, focusing 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 when announcing the offering, “not intended as, or subject to, an investment opportunity.” But trading patterns show that this was not the way buyers interacted with these tokens: in most cases they were bought and sold in an attempt to make money.
During the Biden administration, the SEC under Mr. Gensler took an aggressive stance toward cryptocurrencies, arguing that the vast majority of them were securities that needed to be heavily regulated.
In 2023, the SEC accused the backers of an NFT cartoon series called Stoner Cats of selling an unregistered security after the images were marketed in a manner that “reasonably led investors to expect to benefit from the management and entrepreneurial efforts of” the supporters.
Allison Herren Lee, a former SEC commissioner, said the Trump family's new coins would certainly have attracted a staff review during her tenure to determine whether they complied with the law.
“That analysis is not about whether the originators call it a security,” she said. “It depends on whether it is marketed as an investment, which generally means buyers get a return based on the efforts of others.”
Democrats in Congress, including Senator Elizabeth Warren of Massachusetts, have already written to federal regulators asking them to investigate the matter.
But now that such an investigation were to be opened, the SEC would actually have to investigate the family of a president who just appointed the agency's chairman – a seasoned securities lawyer with close ties to the crypto industry.
David Sacks, a venture capitalist appointed by Trump to oversee his administration's technology policies, said this week that the coin was “like a baseball card or a postage stamp” and “perfectly fine” to sell.
It's already clear that some buyers of the $Trump token jumped too slowly and ended up losing money. In a series of transactions, an investor using the pseudonym Ansem spent $9 million in cryptocurrency to buy $Trump just before it fell in value, then sold the assets two hours later at a loss of about $2 million, according to the first-ever report identified public transaction data. through an account called Lookonchain.
Still, the Ansem account continued trading $Trump in the coming days, the data shows, perhaps hoping to make up for the loss.
