- $LIBRA: The crypto scam driven by the President of Argentina caused $286 million in losses to investors from various countries.
- The negative impact on markets and the financial industry is reflected in losses and distrust in the ecosystem.
- The Solana network collapsed: it lost 25% of its market value.
- The case was reported to the FBI and the SEC.
The scandal triggered by the promotion of the $LIBRA crypto asset by the President of Argentina has shaken both local society and the financial industry, as well as the global crypto ecosystem.
Media outlets worldwide covered the complex story behind the scam that resulted in the memecoin $LIBRA (likely named after President Javier Milei’s zodiac sign).
Built by an illegal company, unauthorized to act as a broker, financial advisor, or exchange, this token lost $4.4 billion in market capitalization just hours after its launch, with thousands of investors losing $286 million.
For those who have not looked into how this fraud was carried out and who the key players behind it are, we recommend this video with an excellent detailed summary by journalist Lara López Calvo. You will also find at the end of this article a compilation of key data and updates on the development of this story.
Next, we will review the impact this event has had on the financial industry, investors, and the broader crypto community.
Impact on markets and the industry
Last Saturday, Cardano founder Charles Hoskinson shared a video linking this unfortunate episode to a scene he himself starred in; he revealed that he was interested in collaborating with Argentina’s crypto ecosystem but backed off when officials from President Javier Milei’s office asked for bribes (kickbacks) to make “magical things happen.”
This was one of many public expressions of shock and distrust voiced on social media, and it triggered a chain of negative impacts, the full extent of which is yet to be revealed.
Markets in Argentina reflected the uncertainty, starting the week with a 7% drop in the stock market, losses in bonds, and an increase in both the parallel dollar (blue) and crypto dollar. Additionally, the country’s risk rose.
The reopening of Wall Street after the holiday on Monday, 17th, revealed the magnitude of the negative impact, with Argentine-origin assets falling. These companies lost more than $5 billion.
Meanwhile, the Argentine Fintech Chamber issued a statement expressing its concern: “Argentina is one of the global leaders in crypto and blockchain adoption, with more than 2.5 million active monthly crypto wallet users (…). To fully capitalize on this potential, it is essential to operate within a framework of transparency and security, with platforms registered and supervised by the National Securities Commission (CNV).”
The losses for the country are still incalculable, as many of the 400 local and international lawsuits will be filed against the Argentine state.
Another negative consequence: since the crypto asset was created on the Solana platform, its native token collapsed, losing 25% of its value. This severely tarnished the reputation of this network in the crypto entrepreneur ecosystem.
Binance founder Changpeng Zhao also publicly expressed his regret over the incident; moved by a student who lost all of his savings, he announced that he would contribute to a fund to help the scam’s victims.
Various authoritative voices also expressed concern over the repercussions. For example, cryptocurrency expert and programmer Maxi Firtman stated: “The president gave legitimacy to a project that had no backing. This could lead to greater caution from investors when following public figures’ recommendations.”
The abrupt fall of $LIBRA has highlighted the risks associated with unregulated tokens. Platforms like Ripio, which listed the cryptocurrency, are facing criticism for the misstep. The need for stricter measures in exchanges to prevent the inclusion of fraudulent assets has become evident.
Contrary to the persistent – and false – narrative about “public spending cuts” that the president boasts about, the government used pension funds to buy shares and prevent the stock market from crashing.
Pierpaolo Barbieri, founder of Ualá, also publicly addressed the situation.
This infographic created by Monitor Digital reflects the negative sentiment recorded over the weekend in public discussions on social media and the media regarding cryptocurrencies in Argentina:
A Collapse in Credibility
The crypto community and the fintech ecosystem initially felt very excited about the promises made by the Argentine president, who has been in office for 14 months.
However, the scandal damaged trust in both the honesty and judgment, as well as the intellectual authority of Javier Milei on several fronts.
He self-proclaimed himself an expert in cryptocurrencies, giving lectures on the topic, but couldn’t foresee that he was promoting a scam? Or did he receive money for promoting the project?
This scandal also unfolds when his economic model is being questioned in unison by economists across the ideological spectrum, as well as by the International Monetary Fund. The core of the criticisms centers on his intervention in the currency market to artificially keep the dollar low (which turned Argentina into one of the most expensive countries in the world).
Criticism of his improvised cabinet (lacking technical teams in all government areas) is also growing, as is the opaque role of the Secretary-General of the Presidency—his sister, Karina Milei—whose only professional background before assuming this key position is her experience as a tarot reader and pastry chef; many businesspeople point to her as the one in charge of “pricing” each meeting requested with the president.
Key points of the fraud
The $LIBRA token was created 3 minutes before President Javier Milei promoted it on his social media.
More than 75,000 investors lost $286 million.
The asset didn’t have a whitepaper nor any value proposition: it was the presidential promotion that catapulted it, which is why it attracted millions in investments.
The Argentine president promoted it as a serious initiative aimed at providing “financing to Argentine SMEs.”
However, there was no transparency on which companies would receive funds or through which mechanism.
He never warned his followers that it was a memecoin or that there was a high risk of investing in the project.
This is the third time economist Javier Milei has backed crypto projects that ended up defrauding investors. In the previous two cases, he promoted them while serving as a legislator. He admitted in a radio interview that he received money for those promotions.
By the time of this edition’s closure, renowned Argentine journalist Alejandro Bercovich revealed that President Milei’s collaborators had received $5 million to promote the controversial project. This information about the bribe came from Diógenes Casares, a respected entrepreneur and decentralized finance expert, who confirmed the payment’s existence through a government source.
The prestigious publication Coindesk revealed chats from Hayden Davis—co-creator of the memecoin and advisor to the Argentine president—boasting about the control obtained through bribes: “I send payments to her (Karina Milei) and he (Javier Milei) signs what I want.”
Technology experts had warned the government about the risk and lack of seriousness of the memecoin, yet they decided to go ahead with the launch.
Blockchain expert Santiago Siri explained in a post on X that by analyzing the traceability of the 3 main wallets that held the $100 million profit from $LIBRA, it was confirmed that they were tagged with the following labels:
• Milei
• Milei CATA
• VladMilei
Julian Peh, CEO of KIP Protocol, tried to distance himself from the project, stating that his involvement was limited to providing the technical infrastructure.
