The Feel of a Crypto Ponzi Scheme
The Donald Trump meme coins are all over the news since their introduction just before Inauguration Day, with right-leaning news outlets saluting Trump’s financial acumen for their early cyber success and critics reflecting concern about who might be buying them.
Along with Trump-stamped gold watches and sneakers, signed Bibles, cut cloth from the suit he wore during the assassination attempt in a Pennsylvania field and cartoon super figures, it seems that everything with a Trump label — including presidential policy — is for sale.
From the repeated emphasis on seating billionaire Big Tech leaders in favored Inaugural chairs to specific references to Mars in his speech as a nod to Elon Musk to his flip-flop on TikTok operations after a big campaign contribution, Trump indicates over and over that he is open to influence through money as well as flattery.
Trump is seizing the opportunity to make money — despite being President of the United States. What critics see as “grift,” Trump apparently sees as opportunity and a good way to spend his time.
Even from the outset, when Trump is flooding our zone with executive orders and imposing his personal values on our public issues, the themes of retribution that serves himself works hand in glove with a desire to enrich himself.
Not New
Critics note Trump has always looked out for himself. During his first term, there were complaints about the number of foreign visitors who had to stay at his hotel in Washington, or how much he charged the Secret Service to stay at his resorts, or how he was unable to keep his Trump Organization business at arm’s length — even writing monthly checks in the White House to lawyer Michael Cohen that help result in his conviction on 34 counts in the hush-money case in New York.
Sometimes, the grift has been for votes rather than cash. Among the pardons from Trump this week was one for Ross Ulbricht, a Bitcoin pioneer serving a life sentence for running the dark web Silk Road, the world’s largest online drug marketplace. The pardon drew notice as a blatant example of freeing a bad guy but because it was the result of a promise for votes from Libertarians who regarded a market outside government reach as a hero.
Since the election, Trump has been collecting from the nation’s richest and their corporations in million-dollar chunks for his inauguration, for his eventual presidential library, for his business ventures and investments. Totals exceed a half-billion or more, depending on who’s reported and seeking to compile the numbers.
It is the scale of the grift that is astonishing. We should be looking at this memecoin offering in that wider context.
With a mantle of presidential immunity over his term in office and enough Republicans in Congress to assure no impeachment effort will ever succeed, Trump has the throttle for personal gain wide open. The results: Those 200 million $Trump coins have risen in trade value among collectors from $6 to about $40, with monetary worth in the billions of dollars of actual cash. Trump’s cybercurrency company plans to issue another 600 million, with Melania coins as well.
Maybe it’s just collectors, maybe it is cryptocurrency bettors, maybe it is the new vehicle for anyone seeking favor from the new administration to benefit from some mention or policy change, but for sure it is the stuff that the Constitutional ban on “emoluments” sounds like it was designed to halt. This digital pay-me scheme is an open avenue for foreign players to shift money in uncontrollable amounts.
In any case, none of this is lowering the price of eggs for you and me.
Downsides?
The cyber industry, which celebrates its newest player, also recognizes that the coins have a darker potential. “The $TRUMP token, which reached a market capitalization of nearly $6 billion within 24 hours of its launch, represents more than just another entry in the booming cryptocurrency market–it seems poised to serve as a vehicle to force the U.S. Supreme Court to definitively rule on the Constitution’s Emoluments Clause while simultaneously helping challenge crucial governmental oversight regulations which help tackle financial crime,” says an industry site called Hacking but Legal.
Other Trump enterprises may be unseemly for a president who is supposed to put his interests into public trust (this one has not), but the amounts of money and the stealth in the still evolving, volatile cybercurrency world puts this issue into hyperdrive.
Trump now owns an instantly success player in a world that he is supposed to be regulating. Trump has gone from cyber resistant to his own company in record time.
As Catherine Rampell of The Washington Post explains it, it all comes across like a crypto-Ponzi scheme.
“This kind of crypto token or ‘memecoin’ is released and traded on public markets, sort of like a stock. Unlike stocks, however, memecoins have no cash flow, no fundamental value. There’s no claim to a business’s future profits, nor even the pretense of a business model. . . No one is pretending $TRUMP will be used in real-world transactions to pay for groceries or a haircut, or to send remittances.”
Rather, like Elon Musk’s dogecoin, Trump saw a chance to enter the fray with a personalized coin he could hawk for association with his image and $Trump name. From two days before the swearing-in, the value of the coins rose from $6 to $75 in trading before settling in at $40, Trump insiders are said to own about 80 percent of the tokens, which means on paper they have made tens of billions of dollars for doing precisely nothing. They now need to find someone to buy theirs to make money.
As Rampell argues, “For the next four years, there may be one reliable source of ongoing $TRUMP buyers: individuals, companies and foreign governments that want to curry favor with the president. This memecoin has now become the easiest, most convenient way to do that.”
She adds, “The Saudis no longer need to stay at one of Trump’s hotels — or merely pretend to — to line the president’s pockets; they can flash their digital wallet to show how much they’ve boosted his net worth. After all, every dollar they put into propping up the value of Trump’s memecoin will effectively add cash to Trump’s bank account, emoluments clause be damned.”
“There are shameful and major conflicts of interest with respect to his family business benefiting from his cryptocurrency policies,”\James Thurber, the founder and former director of the Center for Congressional and Presidential Studies told The Guardian. Trump “does not seem to worry about the public interest with respect to cryptocurrency”, added Thurber. “He seems to be driven by profit and wanting to be a major part of the billionaire class in the U.S.”
Theoretically, the government could put some safeguards in place but what are the chances of that? Rampell says some $TRUMP insiders appear to be transferring some of their tokens to an overseas trading platform that is not allowed to execute trades in the United States.”
