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$Libra cryptocurrency scandal

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The $Libra cryptocurrency scandal is an ongoing political scandal that began on February 14, 2025, when the president of Argentina, Javier Milei, promoted a cryptocurrency project called $LIBRA. The price of the meme coin spiked following Milei's promotion but then suffered a severe price drop, leading to allegations of a rug pull scam. This scandal has been dubbed Cryptogate.[1][2][3] The Economist called it the "first big scandal" of Milei's presidency.[4]

Background

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In 2021, then-national deputy Javier Milei recommended a crypto platform called CoinX that promised, through automated trading algorithms, to provide high returns of up to 8% per month. CoinX would end up being reported for fraud.[5]

A year after Milei's recommendation, the National Securities Commission banned the financial operation for not having any authorization to offer investments and compared its operation to a Ponzi scheme. Thousands of investors were affected by CoinX and suffered millions in losses.[5] In response to 23 Argentine Federal Police raids on offices and homes in Buenos Aires and the Santa Fe Province investigating the alleged fraud, Milei responded: "I only gave my opinion".[5]

In 2022, Milei promoted the Vulcano Game NFT gaming project, describing it as "very interesting". In the weeks after Javier Milei's announcement, the price of the video game company's token, $VULC, went to $0.[6]

A week before $Libra's launch, Diógenes Casares, co-founder of decentralized finance company Stream Finance, wrote a report mentioning rumors that "a meme coin around Milei [was] being created," including the involvement of bribes. However, he initially thought they were not real.[7][8] American analyst Nick O'Neill stated that "Javier Milei and his team worked for weeks on launching a token" and claimed "with 100% certainty" that payments were involved in the development and launch of $Libra.[9]

On Friday, February 14, 2025, at 6:58 pm Argentina time, the Delaware-registered company Kelsier Ventures created the "$LIBRA" token libra (transl. liberty) without publicizing the event, as part of a project called "Viva La Libertad" (transl. Long Live Freedom).[10][11] The CEO of the company Kelsier Ventures is Hayden Davies, who had previously met with Milei at the Presidential Palace in 2024. The one who introduced them was Mauricio Novelli, a young trader who has known Milei since at least 2021.[12]

$Libra promotion

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Three minutes after the token's creation, on Friday, February 14, 2025, at 7:01 p.m. Argentina time, Milei shared posts promoting the coin on his X, Instagram, and Facebook accounts.[13] The posts described it as launching a private economic initiative to stimulate economic growth in Argentina through investment in small businesses and startups. Milei stated that the project operated under the token identifier $LIBRA and was structured to facilitate private investment in Argentine enterprises. He posted the project's associated blockchain contract address in the same message.[14][15]

During the time the tweet remained pinned to President Milei's account, the price of $LIBRA quickly rose from $0.000001 to $5.20.[16] Within a few hours, its price dropped to $0.99.[17] The market cap[note 1] of $LIBRA reached $4.6 billion, then fell to only $162 million by February 15.[18]

The tweet by President Javier Milei that launched the $LIBRA project was shared by the President of the Lower House, Martín Menem, by national deputies José Luis Espert and Damián Arabia, and also among supporters of La Libertad Avanza such as Gordo Dan, Agustín Laje, and Emmanuel Danann.[19]

There was speculation that Milei's account might have been hacked, which was denied by members of La Libertad Avanza, such as Lilia Lemoine, and then by Milei himself when he disassociated himself from the project in a later tweet.[17]

On February 17, after a new tweet from Javier Milei retweeting Darío Epstein, the cryptocurrency rose again, only to collapse again.[20]

Twitter users began to use the platform's Community Notes feature to warn users about a possible rug pull scam under the initial promotional tweet.[14]

Retraction

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Hours after the initial promotion, President Milei withdrew his endorsement and deleted the social media post. In a follow-up statement, he acknowledged sharing the information without properly verifying the project's details, explaining that he had no connection to the enterprise. The president characterized the incident as one of many routine social media posts he had made before in support of private enterprise initiatives. President Milei criticized political opponents he accused of attempting to exploit the situation.[21]

At roughly the same time, the company KIP Network Inc. posted a message describing the $LIBRA project as a success and stated that President Milei had never been involved with the project's development.[22]

Hayden Mark Davis, advisor to the launch of $LIBRA, stated that the advertising campaign had been previously agreed upon with the president's team and accused Milei of "betrayal" for abruptly withdrawing his support.[23]

Impact

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The number of people affected by the project is around 44,000.[24]

Seventy percent of the total tokens were in the hands of their creators.​ A few accounts had profits estimated between 70 and 100 million US dollars in a few hours. According to The Economist, "it seems that insiders may have profited from prior knowledge of Mr Milei's post."[4]

The project granted significant profits for the initial owners, who took the opportunity to get rid of the tokens when their price was high, and massive losses for many who invested after being motivated by the Argentine president. The nine founding accounts of the cryptocurrency earned about $87 million from 50,000 people who invested in it and saw its value disappear, with many media outlets describing the situation as characteristic of a scam commonly known as a "rug pull".[1][16][25]

Several economic experts pointed out that those affected had advanced knowledge of digital currencies since, to access said cryptocurrency, it was necessary to have a wallet in Solana, a blockchain known for its low security and reduced operating costs. In addition, the purchase had to be made with the SOL cryptocurrency, which limited participation to people with prior knowledge of the ecosystem.[26]

Mariano Biocca, a specialist in the crypto ecosystem, explained that $LIBRA belongs to a group of assets whose access is considerably complex and requires advanced technical knowledge. According to Biocca, "Up to the information we have, there was no person who exchanged pesos for $LIBRA directly," suggesting that investment in this cryptocurrency was not within reach of the general public or the middle class without experience in cryptocurrencies.[27]

Political repercussions

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Rejected proposal to call Karina Milei to testify before the Congress.

The main opposition block, Union for the Homeland (UxP), has heavily criticized the president's actions and has proposed articles of impeachment in response.[28][4] Socialist Party lawmaker Esteban Paulón presented a second bill to initiate impeachment proceedings.[29] However, the initiative does not have enough supporters in the Impeachment Commission to proceed with the proposal.[30]

The Workers' Left Front (FIT) requested the immediate appearance of Milei in the Chamber of Deputies to provide verbal reports on the promotion of the cryptocurrency.[31] Those requests were declined by the Congress.[32]

The Civic Coalition, represented by its president Maximiliano Ferraro, distanced itself from the impeachment proposal. Ferraro stated that, although what happened was serious and could constitute crimes such as money laundering or fraud, impeachment was not the solution. Instead, he advocated for ensuring the proper service of justice and made himself available to collaborate in the relevant investigations.[33]

Republican Proposal (PRO) expressed concern about the incident's economic impact and possible damage to Argentina's credibility. However, they rejected impeachment, calling it "opportunistic."[33]

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Over 100 criminal complaints alleging fraud were filed against Milei by February 17.[4] Most accusations were lodged by politicians aligned with Kirchnerism, and a group led by Claudio Lozano [es], the leader of the opposition Popular Unity party, filed charges of fraud against Milei.[34][35] In the first 48 hours following Milei's initial tweet, 112 criminal complaints were filed in the Supreme Court of Argentina.[34]

In response, Milei ordered the Anti-Corruption Bureau to determine whether any member of the national government, including himself, had misbehaved.[36] Additionally, a new body called the "Unit for Investigation Tasks" was created within the Presidency to investigate the entire $Libra project.[37]

International law firms, such as Burwick Law, organized class action lawsuits on behalf of foreign investors who suffered significant losses following the collapse of $LIBRA. These firms sought to group affected parties from various jurisdictions to present cases in international courts, arguing that Milei's cryptocurrency promotion constituted a deceptive practice that led to detrimental investments.[38]

On February 17, 2025, an Argentine law firm operating in the United States and victims of the cryptocurrency scam reported Milei and other responsible parties to the United States Department of Justice and the FBI.[39]

See also

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Notes

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  1. ^ The market cap of a cryptocurrency is the price of the currency times the number of coins in existence.

References

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  1. ^ a b "Argentina: la oposición pide investigar a Milei tras promocionar criptomoneda que se desplomó" [«Argentina: opposition calls for investigation into Milei after promoting cryptocurrency that crashed»]. France 24. February 15, 2025. Retrieved February 18, 2025.
  2. ^ Dale, Brady (February 18, 2025). "Argentina's LIBRA meme coin fails where Trump succeeded". Axios. Retrieved February 19, 2025.
  3. ^ Redmond, Nora. "Argentina's populist president promoted a meme coin — and now faces impeachment calls". Business Insider. Retrieved February 19, 2025.
  4. ^ a b c d "Javier Milei's crypto misadventure". The Economist. ISSN 0013-0613. Retrieved February 22, 2025.
  5. ^ a b c "CoinX: el antecedente de Javier Milei recomendando otra supuesta estafa cripto" [CoinX: Javier Milei's background recommending another alleged crypto scam]. Perfil (in Spanish). February 15, 2025. Retrieved February 18, 2025.
  6. ^ "Vulcano y CoinX, los fraudes previos vinculados a Javier Milei" [Vulcano and CoinX, the previous frauds linked to Javier Milei]. Perfil (in Spanish). February 16, 2025. Retrieved February 18, 2025.
  7. ^ "Karina Milei, la puerta de entrada a la Casa Rosada para los personajes detrás de la criptomoneda del escándalo". La Nación (in Spanish). February 15, 2025. Retrieved February 16, 2025.
  8. ^ "Empresario cripto cuenta la trama secreta del escándalo $Libra y el supuesto pago de coimas por US$5 millones". Perfil (in Spanish). February 17, 2025. Retrieved February 19, 2025.
  9. ^ Dolabjian, Camila (February 16, 2025). "El escándalo de $LIBRA abrió una caja de pandora: pedidos de coimas y gestiones para acceder a Milei". La Nación (in Spanish). Retrieved February 16, 2025.
  10. ^ "Crónica de una estafa anunciada: el minuto a minuto de la memecoin que promocionó Milei". Cenital (in Spanish). February 15, 2025. Retrieved February 16, 2025.
  11. ^ "Viva La Libertad Project". Viva La Libertad Project. Archived from the original on February 15, 2025. Retrieved February 15, 2025.
  12. ^ "Libra co-creator bragged about paying Javier Milei's sister for token post: Report". msn.com. Retrieved February 22, 2025.
  13. ^ "Crónica de una estafa anunciada: el minuto a minuto de la memecoin que promocionó Milei". Cenital (in Spanish). February 15, 2025. Retrieved February 16, 2025.
  14. ^ a b Chaves, Facundo (February 16, 2025). "La fallida cripto $LIBRA provocó un fuerte impacto político y el Gobierno enfrenta una ofensiva opositora" [The failed crypto $LIBRA caused a strong political impact and the Government faces an opposition offensive]. infobae (in European Spanish). Retrieved February 18, 2025.
  15. ^ ""Viva la Libertad Project": opositores de Milei lanzaron una catarata de críticas y pidieron explicaciones por la promoción de "Libra"" [“Viva la Libertad Project”: Milei's opponents launched a torrent of criticism and demanded explanations for the promotion of "Libra"]. Rosario3 (in Spanish). Retrieved February 18, 2025.
  16. ^ a b "Cómo fue la operatoria con $LIBRA, la criptomoneda que promocionó Javier Milei en redes sociales" [«How the operation with $LIBRA, the cryptocurrency that Javier Milei promoted on social networks, went»]. infobae (in European Spanish). February 15, 2025. Retrieved February 18, 2025.
  17. ^ a b "Polémica por un tuit de Javier Milei en X: promocionó una criptomoneda y luego borró el posteo" [Controversy over a tweet by Javier Milei on X: he promoted a cryptocurrency and then deleted the post]. Cronica. February 14, 2025. Retrieved February 18, 2025.
  18. ^ "Argentinian President Javier Milei shares $LIBRA scam coin on X, $4.4 billion erased from the market". www.mitrade.com. Retrieved February 18, 2025.
  19. ^ Soriano, Por Fernando (February 16, 2025). "Cronología de la fallida promoción de la criptomoneda $LIBRA: del tuit de Javier Milei a lo que podría pasar en el Congreso" [Timeline of the failed promotion of the cryptocurrency $LIBRA: from Javier Milei's tweet to what could happen in Congress]. infobae (in European Spanish). Retrieved February 18, 2025.
  20. ^ elDiarioAR (February 17, 2025). "Milei reposteó un instructivo para comprar $LIBRA y la criptomoneda volvió a subir para después hundirse otra vez" [Milei reposted an instruction to buy $LIBRA and the cryptocurrency rose again and then sank again]. elDiarioAR.com (in Spanish). Retrieved February 18, 2025.
  21. ^ "El presidente Milei promocionó una criptomoneda y luego admitió que no estaba interiorizado del proyecto" [«President Milei promoted a cryptocurrency and then admitted that he was not aware of the project»]. infobae (in European Spanish). February 15, 2025. Retrieved February 18, 2025.
  22. ^ elDiarioAR (February 16, 2025). "KIP Protocol se desliga de la caída de $LIBRA tras el escándalo con Milei" [«KIP Protocol distances itself from the fall of $LIBRA after the scandal with Milei»]. elDiarioAR.com (in Spanish). Retrieved February 18, 2025.
  23. ^ "Hayden Davis: el enigmático especialista en cripto que quedó en el centro del escándalo $LIBRA" [Hayden Davis: The enigmatic crypto specialist at the center of the $LIBRA scandal]. Forbes Argentina (in Spanish). Retrieved February 18, 2025.
  24. ^ "ESCÁNDALO: el token $LIBRA movió millones y se derrumbó en minutos - El Economista" [Milei's cryptocurrency scam: THIS is what happened, according to an EXPERT]. eleconomista.com.ar (in Spanish). Retrieved February 18, 2025.
  25. ^ Telechea, Juan Manuel (February 15, 2025). "$Libra: qué pasó con la estafa que promocionó Milei" [Chronicle of a scam announced: the minute by minute of the memecoin that Milei promoted]. Cenital (in Spanish). Retrieved February 18, 2025.
  26. ^ ""Acá no hay doña Rosa, no hay inversores pyme": un economista de Harvard explicó el negocio detrás de $LIBRA" [“There is no Mrs. Rosa here, there are no SME investors”: a Harvard economist explained the business behind $LIBRA]. infobae (in European Spanish). February 17, 2025. Retrieved February 18, 2025.
  27. ^ "El rol de Javier Milei en el caso $Libra: "No es normal que un presidente publique un link directo para comprar un activo de alto riesgo"" [Javier Milei's role in the $Libra case: "It is not normal for a president to publish a direct link to buy a high-risk asset"]. Canal E (in Spanish). February 17, 2025. Retrieved February 18, 2025.
  28. ^ "La oposición confirma que pedirá juicio político contra Milei por la criptomoneda que promocionó" [The opposition confirms that it will request impeachment against Milei for the cryptocurrency he promoted]. infobae (in European Spanish). February 16, 2025. Retrieved February 18, 2025. 'el gancho de una estafa digital'
  29. ^ Cagliero, Ignacio (February 18, 2025). ""Corresponde que se investigue"" ["An investigation must be carried out"]. Página 12 (in Spanish). Retrieved February 19, 2025.
  30. ^ Delfina Celichini (February 17, 2025). "¿Puede avanzar un juicio político contra Javier Milei?" [Could an impeachment trial against Javier Milei move forward?] (in Spanish). La Nación. Retrieved February 19, 2025.
  31. ^ "La oposición argentina confirma que pedirá juicio político contra Milei por la criptomoneda que promocionó" [The Argentine opposition confirms that it will request impeachment against Milei for the cryptocurrency he promoted]. EITB (in Spanish). February 16, 2025. Retrieved February 18, 2025.
  32. ^ Gustavo Ybarra (February 20, 2025). "Senado: por un voto, el Gobierno evitó la creación de una comisión investigadora del escándalo cripto" [Senate: By one vote, the Government avoided the creation of an investigative commission into the crypto scandal] (in Spanish). La Nación. Retrieved February 21, 2025.
  33. ^ a b "El PRO califica de "grave" la criptoestafa, pero no carga sobre Javier Milei y guerrea con el kirchnerismo" [The PRO describes the crypto scam as "serious", but does not attack Javier Milei and fights with Kirchnerism]. LetraP (in Spanish). Retrieved February 18, 2025. oportunista
  34. ^ a b Elverdin, Por Juan Pablo (February 16, 2025). "Hay 112 denuncias penales en la Justicia Federal por el caso de la criptomoneda promocionada por Javier Milei" [There are 112 criminal complaints in the Federal Court for the case of the cryptocurrency promoted by Javier Milei]. infobae (in European Spanish). Retrieved February 19, 2025.
  35. ^ "Denuncian penalmente a Milei por el escándalo cripto y lo acusan por una "megaestafa"". elDiarioAR.com (in Spanish). February 16, 2025. Retrieved February 18, 2025.
  36. ^ "Cryptocurrency promoted by Argentina's Milei crashes". France 24. February 16, 2025. Retrieved February 17, 2025.
  37. ^ "Milei pidió a la Oficina Anticorrupción que intervenga para investigar el caso de la criptomoneda". A24 (in Spanish). February 15, 2025. Retrieved February 16, 2025.
  38. ^ Glezer, Luciana. "Estudios jurídicos internacionales preparan demandas masivas contra Milei por la estafa cripto" [International law firms prepare massive lawsuits against Milei for crypto scam]. www.lapoliticaonline.com (in Spanish). Retrieved February 19, 2025.
  39. ^ Alconada Mon, Hugo (February 17, 2025). "Denuncian en Estados Unidos a Javier Milei y a los otros protagonistas del escándalo $LIBRA" [Javier Milei and the other protagonists of the $LIBRA scandal are denounced in the United States]. LA NACION (in Spanish). Retrieved February 19, 2025.
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