Argentine President Javier Milei’s foray into the world of cryptocurrency has taken a decidedly negative turn, leaving him embroiled in a memecoin scandal just ahead of a crucial trip to the United States.
What began as a late-night social media endorsement has spiraled into a political crisis, complete with accusations of scams and a plummeting market.
The LIBRA surge and collapse
Late Friday night, the outspoken social media user directed his followers to a website that claimed to be raising funds for small businesses in Argentina using cryptocurrency.
Half a world away, digital currency entrepreneur Hayden Davis watched as the LIBRA token, a memecoin he had helped launch, began its meteoric rise.
The token’s market value soared past $1 billion, then $2 billion, eventually exceeding $4 billion.
However, as is often the case with such speculative assets, the surge proved unsustainable.
When LIBRA crashed, Milei’s presidency was plunged into crisis mode.
According to a report in Bloomberg, prominent investors, including Barstool Sports founder Dave Portnoy, suffered significant losses and denounced the token as “the biggest rug pull of all time,” a term in crypto parlance for a scam.
Davis himself later acknowledged holding some profits despite the decline.
An internal probe and accusations of moral bankruptcy
These events have triggered an internal government investigation, and prominent voices in the crypto world are pointing fingers at each other as Milei tries to navigate the political fallout.
“The LIBRA saga is a travesty,” Henry Elder at UTXO Management told Bloomberg.
It’s a stark illustration that the current crop of crypto leaders lack any moral compass whatsoever.
Argentine stocks take a hit
The fallout from the LIBRA crash has also impacted the broader Argentine market.
Investors in Buenos Aires responded to the situation by selling off shares in some of the country’s largest companies.
The benchmark S&P Merval Index saw its biggest intraday drop in roughly three weeks, falling as much as 5.8% before partially recovering.
The scandal comes at an inopportune moment for Milei, who is scheduled to travel to Washington this week in the hope of meeting with Donald Trump.
The Argentine leader aims to garner Trump’s support for his country to receive additional funding from the International Monetary Fund (IMF) under a new program still under negotiation, as well as potential exemptions from Trump’s tariffs.
A crypto-friendly image and global connections
Milei, who won Argentina’s election in late 2023 by a landslide with supporters desperate for a swift economic overhaul after several years of crisis, has increasingly aligned himself with right-leaning leaders worldwide.
The president’s crypto endorsement was reminiscent of the token Trump himself launched just days before his inauguration.
The LIBRA token launched on Solana, a blockchain with fast transaction speeds and low fees that’s made it popular with memecoin traders.
Compounding the confusion over the weekend were the contradicting tales.
After LIBRA crashed, Davis — the chief executive officer of Kelsier Ventures — said Saturday in a video posted to X that he was Milei’s adviser, “working with him and his team on much bigger tokenization and really cool stuff in Argentina.”
Milei’s office then issued a statement saying Davis “didn’t have nor has any connection to the Argentine government.”
According to Milei, he had met Davis last month at the presidential palace in Buenos Aires because the crypto executive would be involved in providing the digital infrastructure for LIBRA.
The Argentine president had gotten wind of the project months earlier, when a trader he knew from before his time in office introduced him to Julian Peh, the head of KIP Protocol, the company that first proposed the token.
However, on Saturday, Milei said that he did not have any detailed knowledge about LIBRA, saying he was supporting a private initiative that appeared to have good intentions but with which he had no ties.
At the same time, Davis claimed that Milei had endorsed and actively promoted the token before unexpectedly backtracking.
Davis said Saturday he planned to return the profits he’d collected back to the token in a bid to reassure crypto buyers.
Neither Milei’s office, Davis nor Peh immediately responded to requests for comment.
In a statement released Monday, KIP Protocol said the only time Peh or any other member of its team had met Milei was in October last year, where LIBRA was not mentioned.
The firm added that KIP wasn’t in charge of the token launch process, that Davis wasn’t employed by or affiliated with the protocol and that it hadn’t profited from the launch.
Portnoy’s tale: gifted coins and texting fury
Among the investors left in the wake of the crash was Portnoy, who said Sunday night in an X stream that Davis invited him to participate in the token’s launch.
The two first met at Portnoy’s house a few weeks ago and then Davis spoke to him by phone when the crypto entrepreneur was in Buenos Aires meeting Argentina’s leader.
According to Portnoy, Davis added him to the LIBRA’s “marketing ledger” and even pitched Portnoy on interviewing Milei in Argentina just as he interviewed Trump years ago.
Portnoy said that Davis gifted him LIBRA coins before the launch, but he told Davis he was going to disclose the gift to his social media followers when he promoted the token, but Davis immediately told him to remove that detail from the unpublished post.
Portnoy said he returned the gifted coins, but independently bought LIBRA after Milei’s initial post Friday night, betting on the Argentine leader’s credibility.
He described stewing in the crowd listening to Miley Cyrus perform at Radio City Music Hall in New York for the Saturday Night Live 50th anniversary special, texting Davis to demand answers.
“I was buying like every other fool,” Portnoy said, blaming Milei for misleading Davis and for the token’s failure in profanity-laden remarks.
I didn’t buy any on my own until after Milei tweeted.
Political fallout
This episode has been an embarrassment for Milei and the libertarian economist, who is trying to rebuild Argentina’s crisis-prone economy, has earned rockstar status among leading global capitalists, wowing crowds for two consecutive years at the recent World Economic Forum in Davos, Switzerland.
It’s unclear what the repercussions will be for Milei 10 months before Argentina’s midterm elections.
Political opponents quickly threatened legal action and an impeachment trial that’s unlikely to move forward since it requires a two-thirds majority in Congress.
The major center-right party of former market-friendly President Mauricio Macri that’s backed Milei’s reforms has so far expressed disappointment, but rejected the Peronist opposition’s attempt to oust him.
According to pollsters, Milei may still avoid paying a major political price since inflation is coming down, wages are up and the economy is growing.
His approval ratings have hovered near 47% for months, while all other political parties in Argentina are less popular and more fragmented.
But it revives concerns about the president’s sometimes erratic persona and decisions.
Alejandro Catterberg, director of Buenos Aires-based consulting firm Poliarquia, said “Macroeconomic balance needs to come along with emotional balance. These types of things create a lot of unnecessary uncertainty.”
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