(Bloomberg) -- Late Friday night, prolific social media user Javier Milei directed followers to a site that purported to raise money for small businesses in Argentina using crypto.
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Half a world away, digital currency entrepreneur Hayden Davis saw the value of the Libra token, a so-called memecoin he helped launch, begin to surge. Its market value flew past $1 billion, $2 billion, all the way over $4 billion.
When it collapsed, as such tokens often do, Milei’s presidency in Argentina was in crisis mode. Investors like Barstool Sports founder Dave Portnoy suffered steep losses and dubbed the token “the biggest rug pull of all time” — a reference to the crypto lexicon for a scam. Davis himself, in a later post on social media, acknowledged holding some profits despite the declines.
The events are now the subject of an internal government probe. Prominent members of the crypto world are pointing fingers at each other as Milei tries to recover from a political black eye.
“The Libra saga is a travesty,” said Henry Elder at UTXO Management. “It’s a stark illustration that the current crop of crypto leaders lack any moral compass whatsoever.”
Investors in Buenos Aires took stock of the situation by dumping shares in some of the country’s largest local companies. The benchmark S&P Merval Index saw its biggest one-day drop since July, falling some 5.6% on Monday.
Milei, meanwhile, is heading to Washington this week in hopes of meeting Donald Trump. The Argentine leader wants to secure the US president’s support for his country to receive more money from the International Monetary Fund in a new program that’s still under negotiation, as well as possible exemptions from Trump’s tariffs.
Milei won Argentina’s election in late 2023 by a landslide with supporters desperate for a swift economic overhaul after several years of crisis. He’s increasingly aligned himself with right-leaning leaders worldwide, and his crypto hype 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.”
Initial Intro
Milei said he 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.
By early Saturday, Milei denied having 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. Davis said the Argentine president had endorsed and actively promoted the token, but then unexpectedly backtracked.
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.
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.
Things started going awry Friday when Portnoy — who described Milei as “a mini-Trump-ish type guy” — said Davis gifted him Libra coins before the launch. Portnoy said 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.
As the coin crashed, Portnoy stewed 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
The episode has been an embarrassment for Milei. 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 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.
Pollsters say 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.
“Macroeconomic balance needs to come along with emotional balance,” said Alejandro Catterberg, director of Buenos Aires-based consulting firm Poliarquia. “These types of things create a lot of unnecessary uncertainty.”
--With assistance from Muyao Shen, Olga Kharif, Suvashree Ghosh, Emily Nicolle, Kevin Simauchi and Philip Sanders.
(Updates with market close in 6th paragraph.)
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