Argentine Crypto Scandal: how the government ended up scamming its people

Since assuming office in late 2023, Argentina's President Javier Milei has enjoyed approval ratings consistently above 50%, making him one of the most popular politicians globally. This popularity has provided him with significant political capital to push through sweeping economic reforms, despite his party's minimal representation in Congress. However, Milei's political standing faced a severe challenge over the weekend when he promoted a cryptocurrency called Libra on the social media platform X (formerly Twitter). This endorsement triggered a dramatic rise in the cryptocurrency's value, followed by a total collapse when a handful of insiders cashed out, leaving thousands of Milei's supporters with significant financial losses. This incident has raised questions about Milei's judgment, his involvement in the cryptocurrency market, and the potential political and legal repercussions he may face.

 

The Libra Incident

 

The controversy began late on Friday evening when Milei took to X to promote Libra, a recently created cryptocurrency. He claimed that the coin would raise funds to support small businesses in Argentina. However, the promotion immediately raised suspicions. Presidents typically do not endorse meme coins, and there were no preliminary details about how the cryptocurrency would function. Additionally, it was revealed that approximately 80% of all *Libra* coins were held by a small group of insiders, who could sell their tokens at any time, posing a significant risk to investors. A community note on Milei's post even warned users to verify the project's legitimacy, as it resembled a "rug pull"—a common crypto scam where insiders inflate a coin's value through celebrity endorsements before cashing out and crashing the market.

 

Despite these red flags, Milei's post remained active for about five hours, and he reportedly confirmed his support for the token to Bloomberg Linea. This led to a surge in investments, with approximately 44,000 of Milei's supporters and other investors pouring millions of dollars into *Libra*. Within hours, the cryptocurrency's market capitalization skyrocketed from less than $200 million to $4.5 billion. However, the insiders soon sold their holdings, netting around $107 million and causing the token's value to plummet by 94%. This left the majority of investors with substantial losses.

 

Milei's Response and Political Fallout

 

Following the crash, Milei deleted his post endorsing Libra and issued a new statement acknowledging his support for the coin but denying any direct connection to it. He claimed ignorance of the project's details and blamed the collapse on "filthy rats" within the political establishment seeking to exploit the situation. However, this explanation has done little to quell the uproar. Critics argue that Milei, as both a seasoned economist and the president of Argentina, should have exercised greater caution before endorsing a high-risk asset. His decision to withdraw support only after the crash further damaged his credibility.

 

Moreover, evidence suggests that Milei was more familiar with the project than he admitted. He had previously met with representatives from Kip Protocol, the company behind Libra, and had joined the Buenos Aires city government's blockchain committee in January. Additionally, Hayden Davis, the head of Kelia Ventures (the company that launched Libra), claimed to be an advisor to Milei and stated that they had discussed the project in late January. Davis blamed Milei for the crash, alleging that the president's sudden withdrawal of support caused the collapse—a claim that has been met with skepticism, given that the rug pull occurred hours before Milei deleted his post.

 

This is not the first time Milei has been embroiled in a cryptocurrency scandal. In 2021, as a national deputy, he promoted Coin X, a platform offering implausibly high returns of 8% per month. This turned out to be a pyramid scheme, and Coin X is currently under investigation for fraud. These incidents have raised concerns about Milei's judgment and his willingness to endorse risky financial ventures.

 

Legal and Political Repercussions

 

In response to the Libra incident, Milei's office announced the creation of an investigation task force to determine whether any illegal activities occurred. However, critics argue that this amounts to the president investigating himself, undermining the credibility of the probe. Additionally, a lawsuit has been filed against Milei by several individuals, including Claudio Lozano, a former head of Argentina's Central Bank. The lawsuit alleges that Milei violated Argentina's public ethics law, specifically Article 265, which prohibits public officials from using their position for financial gain. If convicted, Milei could face up to six years in prison, although there is no evidence that he personally profited from the rug pull.

 

Opposition lawmakers have also threatened to impeach Milei, though this would require a two-thirds majority in Congress, which is unlikely given his party's limited representation. However, opposition members have proposed revoking Decree 70, which grants Milei sweeping discretionary powers. This would only require a simple majority, making it a more feasible option. Regardless of the legal outcomes, the scandal is likely to damage Milei's approval ratings and weaken his party's performance in the upcoming midterm elections in October. A poor showing at the polls would hinder Milei's ability to pass his business-friendly reforms and could erode investor confidence in Argentina, which has been buoyed by the expectation of his political dominance translating into legislative success.


The Libra cryptocurrency scandal represents a significant setback for President Javier Milei. While he has enjoyed high approval ratings and political capital since taking office, his endorsement of a risky and ultimately fraudulent cryptocurrency has jeopardized his reputation and political standing. The incident has exposed vulnerabilities in Milei's judgment and raised questions about his connections to the crypto project. As legal and political challenges mount, Milei faces the prospect of diminished influence, both domestically and internationally. The fallout from this scandal could have lasting implications for Argentina's economic and political landscape, underscoring the risks of mixing politics with the volatile world of cryptocurrency.




1- https://x.com/AlanBarrosoA/status/189...

2 - https://www.zerohedge.com/crypto/javi...

3 - https://www.batimes.com.ar/news/econo...

4 - https://cointelegraph.com/news/milei-...

5 - https://x.com/JMilei/status/189060668...

6 - https://x.com/discabord/status/189061...

7 - https://x.com/KelsierVentures/status/...

8 - https://x.com/KelsierVentures/status/...

9 - https://www.business-standard.com/wor...

10 - https://buenosairesherald.com/politic...

11 - https://x.com/myriambregman/status/18...






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