Argentine President Javier Milei is facing growing political and legal challenges following his endorsement of the LIBRA cryptocurrency, which has quickly become one of the most controversial financial fiascos in recent memory.
On February 14, Milei took to social media, promoting LIBRA as a token that could help boost Argentina’s economy by funding small businesses. His tweet, which featured his signature slogan, “Long Live Freedom,” drew in over 3.8 million followers. For a brief moment, it seemed as if the token might be Argentina’s answer to its economic woes.
LIBRA soared from near-zero to $5, only to crash back down to under $1 within hours of Milei’s deletion of the post. By then, the damage was done, and the cryptocurrency’s once-promising market value plunged by billions of dollars.
The Rise and Fall of LIBRA
LIBRA, which was initially introduced as a “meme coin,” skyrocketed in value after Milei’s endorsement. At its peak, the token’s market capitalization reached $4.6 billion, before plummeting by $4.4 billion to settle at just $162 million. The rapid rise and catastrophic fall of the token led many to accuse Milei of promoting a scam, especially after allegations surfaced that LIBRA was a “rug pull” — a type of scam in which project organizers withdraw all funds, abandoning investors.
In the aftermath, more than 100 fraud complaints were filed against Milei, spearheaded by his political opponent, Claudio Lozano. A judge in Argentina launched a formal investigation into the incident, which has since become known as “Cryptogate.” Lawyers and legal experts have debated whether Milei can be directly held responsible for the debacle, but the political damage to his reputation has already been severe.
The Involvement of Hayden Davis
Crypto entrepreneur Hayden Davis admitted his involvement in the launch of LIBRA and another ill-fated token, MELANIA — which briefly saw a market cap of $2 billion before crashing. In an interview with YouTube scam-buster Coffeezilla, Davis confessed to using “sniping” tactics, where insiders or bots quickly buy up newly launched tokens at ultra-low prices, driving up demand and selling for massive profits. This practice is akin to illegal front-running in traditional financial markets.
Davis later tried to distance himself from the fallout, claiming that the fiasco was an “experiment gone wrong” and insisting that Milei himself wasn’t corrupt. However, the damage to both Davis’s reputation and Milei’s political credibility is undeniable. Despite Davis’s claims that he refunded $5 million to investors, the overall picture is grim: 86% of LIBRA investors reportedly lost money, with total losses estimated at $251 million.
Political and legal consequences
The scandal has shaken Argentina’s political landscape, with opposition parties accusing Milei of misleading investors. While it’s unlikely that direct legal culpability will be established, the scandal has severely undermined Milei’s credibility, particularly regarding his economic expertise. As an economist turned president, Milei built his political rise on promises of economic reform and fiscal responsibility. The fallout from Cryptogate calls into question his ability to lead Argentina out of its ongoing economic crisis.
The scandal has also impacted international trust in Argentina, with analysts suggesting that it could have long-term effects on foreign investment and financial markets. In particular, the International Monetary Fund (IMF), which has been a key financial partner for Argentina, is unlikely to look favorably on the incident, especially given Milei’s vocal stance on cryptocurrency.
Milei’s response and public opinion
Milei’s administration has acknowledged the mishap, but the damage to public trust is clear. According to Hernan Letcher, director of the Argentine Center for Economic Policy, the scandal has “undermined Argentina’s credibility abroad” and could hinder the country’s ability to secure future financial support. On the domestic front, Milei’s approval ratings remain high, with some economists suggesting the scandal won’t have long-term economic consequences. However, media outlets like Clarin have pointed to the incident as a severe blow to Milei’s authority, particularly as the next election approaches.
Public protests have also erupted in Buenos Aires, with demonstrators chanting “Less Libra, More Books,” a nod to Milei’s controversial education cuts. Meanwhile, some analysts remain optimistic about Argentina’s economic trajectory, noting recent signs of improvement, such as a drop in inflation and rising wages.
What’s next for Milei?
Despite the crypto scandal, Milei’s government continues to push forward with its radical economic reforms, which include measures designed to tackle inflation and stimulate growth. Recent data, such as the drop in inflation to 2.2% in January, suggests that the country’s economy could be on the rebound. However, the political fallout from the LIBRA debacle is likely to follow Milei for some time, and his ability to regain public trust will be key to his future success.
As the investigation continues and public scrutiny intensifies, Argentina’s future under President Milei remains uncertain — and the lessons learned from Cryptogate could have broader implications for cryptocurrency regulation in the region.
Shogun Lin
