$TRUMP

What are we to make of Trump's new meme coin?

The first days of the new Trump administration have proven to be even more ‘interesting’ than expected, with so much activity that it is hard to keep up with the daily news. And while there is lot from Trump’s first week in office to comment upon, I’d like to focus today upon just one particular action taken by Donald Trump before he took office, which I think may be a more important story than has so far been portrayed in the press. And this is the launch of Trump’s new meme coin, announced just three days before Donald J. Trump was to be inaugurated as the 47th president of the United States.

For those of you who have not been following this story, here is what happened: On Friday January 17th, then President-elect Trump unexpectedly announced the launch of his own meme coin, $TRUMP, floating an initial 200 million coins and reserving another 800mm coins for future issuance, scheduled to take place sometime over the coming three years (ie before Trump leaves office). The 200 million newly issued coins seem to have been issued at a price of around $7, but quickly rocketed to a market price of $75, in the process raising a good chunk of cash for the Trump family and increasing their net worth by an implied $60 billion or so.

Two days later, on Sunday the 19th, the soon-to-be-again First Lady Melania Trump also got into the game, launching her own coin, $MELANIA. This topped up the family net worth by another $2 billion or so, money which will no doubt come in quite handy when the First Lady next goes shopping for hats. Unfortunately for the purchasers of her husband’s coins, however, the unexpected launch of $MELANIA created a bit of chaos in the market and triggered a collapse in demand for $TRUMP, the price of which quickly fell by 50%, erasing almost $30 billion from her husband’s net worth.

All in all, an estimated $100 billion changed hands over the three-day period while the President-elect was preparing to put his hand on the Bible (or not) and swear the presidential oath.

To put this story into context, it may help to recall some of the Trump family’s past ‘commercial ventures’ during the period when Donald Trump was either running for office or serving as president: the sale of Trump and MAGA-branded merchandise, the issuance of digital NFT trading cards, the creation of “Trump authorized” GoFundMe sites, and of course the Trump Hotel and other Trump resorts frequented by those seeking to curry favor with new President. Much of this activity may have seemed at the time to be relatively innocuous, but as we witnessed last weekend the Trump family’s financial ambitions seem to have grown with time.

In 2022, Trump announced the formation of his family’s first crypto-finance firm, World Liberty Financial (WLF) in collaboration with two ‘entrepreneurs’, one of whom described himself as “the dirtbag of the internet” and the other of whom used to teach classes on how to seduce women. The WLF business is now managed by the Trump boys Eric and Don Jr., with assistance from Baron acting as the “DeFi visionary”. And while the WLF business does not appear to have amounted to much so far, the Trump family’s crypto fortunes may have changed significantly with the launch of $TRUMP and the associated trading and financing opportunities this presents.

And let’s not forget the 2024 SPAC-sponsored IPO of Truth Social, an unprofitable company now trading as Trump Media and Technology Group (ticker DJT). As with World Liberty Financial, there does not appear to be much substance to this business (so far), and it remains unprofitable with negligible revenues. (Click here for Trump Media’s latest financial information.) But as with WLF, it does not take much imagination to envision circumstances in which the business and financial prospects for Trump Media could improve markedly with a bit of help from the White House. Which of course may explain why the DJT shares continue to trade at such high prices, with a current implied market cap of $7 billion ($22 billion at its peak), a majority of which remains under the control of Donald Trump.

In the overall context of US presidential protocol, this sort of hyperactive commercial and financial activity is all highly unorthodox, as is just about everything associated with Donald J. Trump. But I think it is fair to say that Trump’s latest crypto gambit seems to be of a different order of magnitude than his prior ventures, with more concerning implications for the public trust.

Keep in mind here that meme coins have little or no intrinsic value and were initially created as a fun novelty item, a ‘joke’ if you will. Readers may recall the 2021 SNL appearance of Elon Musk, the “Dogefather” in which he attempted to explain Dogecoin to a skeptical audience, invoking a litany of digital mumbo jumbo only to concede in the end that Dogecoin was just another techno-financial “hustle”. This was all great fun at the time, but here we are almost four years later and Dogecoin continues to trade actively in the market, with an implied market cap of almost $50 billion. Dogecoin may have been created as a joke, but with daily trading volume of several billion dollars—which was $70 billion in daily volume around the time Musk appeared on SNL—I think we have to concede that this is quite some joke!

The big question of course, is whether this is the sort of thing the President of the United States should be promoting, and personally profiting from. And more importantly perhaps, what the implications may be for the future financial policy of the US government.

Trump’s issuance of meme coins has come in for widespread criticism from many quarters, including the crypto community itself. Many of Trump’s richest and most powerful crypto fans were blind-sided by the announcement of his meme coin launch. which ironically occurred while they were at the “Crypto Ball” in Washington celebrating the imminent inauguration of the man they believed would fulfill his promise to make America the “world capital of crypto”. These folks had apparently hoped that President Trump’s newfound belief in crypto—which he previously dismissed as a “scam against the US dollar”—would at long last bring public credibility and legitimacy to an industry best known for money laundering, financial fraud and the fleecing of unsophisticated customers. But the crypto community now fears that Trump’s opportunistic decision to profit personally off the issuance of his own coins may have poisoned the well and cheapened his embrace of the crypto industry, making his promises to ease crypto regulation appear to be self-serving. “It makes [crypto deregulation] look like [a] quid pro quo,” said one, which of course it might well have been.

As a crypto cynic myself, this particular concern does not trouble me. From my perspective, crypto currency makes Dutch tulips, South Sea shares, and Dotcom stocks seem like the cornerstones of a prudent investment strategy. It is true that all of these items were the subject of immense financial speculation which in the end caused great pain to those who bought into the hype at peak prices, but none of these scandals posed anywhere near the threat to the integrity of financial markets which crypto does today.

Not everyone shares this view, of course, but a large number of people do seem to be concerned about the potential use of $TRUMP coins (and to a lesser extent DJT shares) as vehicles for funneling bribes to our new President. When Donald Trump first ran for office, he described himself as “really, really rich”, worth at least $9 billion, and this gave many voters a false sense of comfort that as president Trump would be immune to the sort of influence peddling and petty corruption which they attributed to past administrations. And while many of us did not believe at the time that Trump was anywhere near as wealthy as he claimed to be, a skepticism born of Trump’s well-earned reputation for extreme exaggeration and shameless self-promotion, Trump is almost certainly wealthier today than he was then (or even than he was two weeks ago). But while Trump may be “asset rich”, much of his wealth is concentrated in investments of uncertain value with poor liquidity and highly volatile market prices, with over $30 billion attributable to just his $TRUMP coins and DJT shares. By most accounts, Trump remains “cash poor” (or at least ‘cash vulnerable’). with over $500 million of outstanding legal judgements against him remaining unpaid. If nothing else, this precarious financial position makes our new President seem particularly susceptible to bribery, corruption and the lure of extortion. And this possibility should concern us all, whatever our views may be on the merits of crypto currency or anything else for that matter.

But how real is this threat that the President may now be financially compromised, and that $TRUMP coins may serve as a vehicle for future bribes? I myself am not at all sure, but some well placed sources believe the threat is very real indeed. One of them is Trump’s own former Communications Director, Anthony Scaramucci, a man who is familiar not only with the crypto world but also with Donald Trump himself. According to “the Mooch”, Trump’s meme coin scheme is rotten and corrupt to the core, going way beyond the pedestrian grifts and ethical lapses of the first Trump administration. Scaramucci believes that the $TRUMP coins are nothing more than a “clearing station for bribery”, which he says is on a par with “Idi Amin level corruption”. In his words, “anyone in the world can [now] essentially deposit money into [the] bank account of [the] President, with a couple [of] clicks. Every favor — geopolitical, corporate or personal — is now on sale, right out in the open."

It is entirely possible that Mr. Scaramucci is overstating this threat in his quest for publicity, as he is wont to do. But the concern is nevertheless a real one, which has no doubt been magnified by Donald Trump’s recent success in extracting (extorting?) tens of millions of dollars from the settlement of seemingly spurious lawsuits filed against several companies who now find themselves vulnerable to potential retribution taken by the Trump administration And contributing to the concern is the Supreme Court’s recent decision granting the President of the United States widespread immunity from criminal prosecution for corrupt actions taken under color of office, even apparently for accepting bribes (eg cash for worthless meme coins or in the settlement of non-meritorious lawsuits) in exchange for official acts. (See Trump vs US, and read the Sotomayor dissent which discusses exactly this possibility.)

But my biggest concern about the President’s issuance of meme coins and his newfound love for all things crypto is what it suggests about the possible future direction of US financial policy. Should crypto currency be regulated differently than it has been to date? Should crypto capital gains be taxed differently than gains on the sale of stocks and bonds? Is there a proper role for crypto in investment portfolios governed by federal law (eg pensions)? Does it make sense for the federal government to replace our national gold reserves with a new bitcoin reserve? Should the Fed explore the creation of a new central bank digital currency? These are all legitimate and important questions of public policy which our elected representatives in Congress and the White House should consider, debate and decide. But when they do, I would like to believe that the deliberations they engage in and the decisions they make will not be influenced or determined by the fact that the President of the United States and his closest advisors stand to reap enormous personal profits from the outcome. Or worse, to believe that these same folks are actively engaged in nefarious schemes like the one which The American Prospect has called the “Crypto plot against America’s gold reserves”.

So where does this leave us? I am not entirely sure, but my biggest fear about the Trump meme coin scandal may be that it gets buried in the public consciousness by the flood of other Trump abuses and outrages yet to come. And while I do not consider myself a member of the anti-Trump ‘Resistance’ movement, I do think we would all be well advised to try not to let that happen, as hard as that might be.