Analysis of the LIBRA Project Scandal: Structural Risks of Politicians' Endorsement of Cryptocurrency

On April 7, 2026, The New York Times disclosed an investigation report that has shaken the crypto industry and political circles around the world. On the night of February 14, 2025, when the LIBRA token went live, Argentine President Javier Milei had a total of seven phone call records with a key figure in the project, Mauricio Novelli, with the timing precisely covering the period before and after he posted promotional content on the X platform.

This news has pushed a crypto scandal that has been brewing for more than a year back to the center of public attention—no longer just a “Rug Pull” scam, but an increasingly emblematic case that tests political trust and the industry’s regulatory bottom line.

Why Presidential Endorsements Have Become a New Paradigm for Meme Coin Harvesting

Over the past two years, the operating logic of the Meme coin market has undergone a notable shift in paradigm. In January 2025, TRUMP—the token issued by former U.S. President Donald Trump—saw its market cap surge to nearly $80 billion in just two days, creating an unprecedented “presidential-level” ceiling for the Meme sector. Less than a month later, Milei followed this path. On February 14, 2025, he promoted the LIBRA token in a high-profile manner via X, claiming that the project would be used to support the development of Argentina’s small and midsize enterprises.

The essence of this model is that a political figure’s social media account becomes a new kind of “trust infrastructure.” Public endorsements by heads of sovereign states, in an information-asymmetry market environment, are equated by investors to a kind of quasi-institutional credit guarantee. However, this trust anchor is precisely the harvesting tool the project team is most likely to exploit. After Milei’s tweet was posted, LIBRA’s market cap jumped to more than $4 billion within half an hour, but then crashed by 85% just four hours later, wiping out more than $4 billion in market value. This “tweet—pump—cash out—crash” cadence exposes systemic manipulation risks in celebrity-endorsed token issuance.

From Tweets to Phone Calls: How the Information Gap Drives Market Manipulation

The investigative progress in the Milei case reveals a deeper problem: the mechanisms driving market manipulation may be far more complex and covert than the public imagines. According to The New York Times, forensic information from the phones obtained by investigators shows that the seven phone call records between Milei and Novelli are distributed across multiple time points around when Milei published tweets. In addition to the call records, the investigation also found documents that appear to involve payment audio and drafts of funding arrangements.

Earlier investigations had already pointed to a more specific chain of interests. Argentine outlet El Destape disclosed a document recovered from Novelli’s phone, detailing a payment agreement totaling $5 million. The agreement was divided into three payments: a $1.5 million advance; $1.5 million conditional on Milei announcing Hayden Davis as his adviser on the X platform; and finally $2 million, tied to a blockchain government consulting contract signed by Milei and his sister. The creation date of this document was February 11, 2025—three days before Milei posted his tweets.

On-chain data further verifies traces of this kind of inside operation. The eight wallets associated with the project had money positioned ahead of the tweet’s release; during the crash, they cashed out $107 million. 86% of traders lost money after investing in LIBRA, with cumulative losses of about $251 million. When there is a systematic time gap and information gap between public information (tweets) and private communications (phone calls, payment agreements), the basic conditions for market manipulation are already in place. This is not merely the improper conduct of one individual, but a proven and replicable harvesting scheme.

When a Head of State Is Pulled Into a Scam: How High Is the Price of Political Trust?

The structural cost brought by the Milei LIBRA scandal has extended beyond economic losses for investors to a crisis of political credibility in Argentina. On February 16, 2025—the day after the LIBRA crash—members of Argentina’s opposition initiated a collective lawsuit against Milei, accusing his conduct of violating the Public Morals Act and constituting “Rug Pull” operations. In November of the same year, Argentina’s congressional legislative committee released an investigation report, concluding that Milei provided the project with “critical collaboration,” and recommending that Congress evaluate his actions.

In March 2026, after the $5 million payment agreement came to light, opposition lawmakers pushed impeachment proceedings again, saying this scandal caused serious negative effects internationally. Although Milei was ruled in June 2025 by Argentina’s anti-corruption office as not violating public ethics standards—on the grounds that the tweets were “personal actions” rather than official actions—the credibility of that ruling has been called into question as new evidence continues to emerge.

More noteworthy are the cascading institutional reactions. Soon after a judge ordered the release of Milei and his sister’s banking records, Milei’s government dissolved the special task force responsible for investigating the LIBRA scandal. This pattern of “advancing the investigation—unsealing information—disbanding the task force” points not only to personal moral issues, but to the systemic response of power structures in the face of a crisis. On the Polymarket prediction platform, the probability of “Milei leaving office in 2025” once rose from 5% before the event to 20%. A political survival crisis for a head of state due to a crypto project collapsing has no precedent anywhere in the world.

How the LIBRA Scandal Reshapes the Trust Boundaries of the Crypto Industry

From an industry perspective, the LIBRA incident may be reshaping the underlying trust structure in crypto markets. On-chain data shows that since the LIBRA harvesting event occurred, liquidity on the Solana chain dropped sharply from about $12.1 billion to $8.29 billion, and the SOL price fell by more than 20% as well. About 75,000 users were affected by the LIBRA flash crash, with total losses of roughly $286 million, and the number of losing users exceeded 86% of all traders.

This trust crisis triggered by the event may accelerate two kinds of industry changes. First, investor vigilance toward “celebrity endorsements” will increase significantly. When a head of state’s token endorsement can complete the full cycle of “pump—sell off—crash” within hours, the market’s valuation logic for celebrity coins will be forced to be rebuilt. Second, the level of involvement by regulators is expected to keep escalating. In February 2025, an Argentine law firm filed criminal lawsuits with the U.S. Department of Justice and the FBI, accusing the LIBRA team of cross-border securities fraud. If the U.S. Securities and Exchange Commission (SEC) steps in to investigate insider trading and establishes that Milei had knowledge of it, it could even trigger discussions about extradition provisions.

From Argentina to the World: Three Evolution Paths for Political Endorsement Risk

Based on current investigative developments and the industry landscape, the subsequent evolution of the Milei LIBRA scandal has three main scenarios.

Scenario 1: Investigation escalation and international regulatory coordination. The degree of involvement by U.S. regulators will be a key variable. If the SEC or the Department of Justice were to characterize LIBRA as a securities fraud case, it could trigger large-scale scrutiny of cross-border celebrity-endorsed token issuance models. There are already signs that among the five biggest crypto controversy events listed by Forbes in 2025, Meme coin issuance involving political figures has occupied a prominent position, and regulators’ attention to such patterns is rising rapidly.

Scenario 2: Political reckoning and institutional repair. In Argentina domestically, Milei faces dual pressure from both impeachment and judicial investigations. Even if Milei can continue governing, the scandal may still push Argentina to introduce clear rules regarding public officials’ participation in crypto projects. If such legislation comes first, other Latin American countries may follow, creating regional regulatory ripple effects.

Scenario 3: Industry self-purification and standard-setting. From the market perspective, the Meme coin sector may need to go through a bubble clearing phase. Some industry observers have pointed out that the LIBRA event could become a time marker—“a moment to let the market cool down and truly discover some valuable projects.” But the speed and depth of self-purification depend on the collective improvement of investor education, exchange risk-control standards, and information disclosure mechanisms.

From Individual Cases to Systemic Risk: Three Blind Spots Still Worth Watching

Despite the LIBRA scandal having exposed many issues with token endorsements by political figures, the following three potential risks may still be underestimated.

First, the completeness of the evidence chain and the difficulty of assigning responsibility. At the legal level, the evidentiary strength of what investigators have obtained—seven phone call records, a $5 million payment agreement, audio recordings from phone forensics, and documents—still involves uncertainty. Milei’s side continues to deny wrongdoing, and investigators have not yet confirmed the specific content of the calls. In the absence of direct evidence proving that the president himself knew about and participated in the cash-out plan, the legal threshold for criminal accountability remains high.

Second, the replicability of the pattern and cross-border regulatory blind spots. LIBRA is not an isolated case. From MELANIA to TRUMP and then to this scandal, a “celebrity endorsement—social media ignition—inside cash-out—project collapse” operating process has been verified multiple times. Such scams often exploit regulatory gaps among different jurisdictions, promote in Argentina, issue on the Solana chain, and trade on offshore exchanges—making cross-border enforcement and pursuit extremely difficult.

Third, the long-term persistence of information gaps. Even if the LIBRA incident becomes a cautionary case, similar patterns with new variations may still emerge in the future. Political figures’ social media accounts have irreplaceable traffic distribution capabilities, while ordinary investors’ disadvantages in terms of information access are hard to fully offset through individual effort. As long as this asymmetry exists, the inherent risks of politically endorsed tokens will not disappear.

Summary

The LIBRA project scandal evolved from a “Rug Pull” incident in a crypto market into a watershed moment that tests Argentina’s political institutions and global industry trust mechanisms. The exposure of seven phone call records and the payment agreement moved presidential endorsements from a “market narrative” to a “investigative evidence” dimension. For the crypto industry, this incident reveals a more essential challenge: when the anchor of trust—public endorsement by political figures—may itself be systematically manipulated, market participants need a more reliable trust mechanism. Improving the regulatory framework, increasing on-chain transparency, and strengthening investors’ risk awareness may be the three most worth discussing agendas after this turmoil.

Frequently Asked Questions (FAQ)

Q: What happened after the LIBRA token was issued?

A: On February 14, 2025, Argentine President Milei posted on X to promote the LIBRA token. The token’s price surged rapidly, and its market cap temporarily exceeded $4 billion. After that, the wallets associated with the project massively withdrew liquidity and sold the tokens, cashing out about $107 million, which caused the token price to crash by more than 90%, resulting in severe losses for investors.

Q: What new evidence did The New York Times disclose?

A: The New York Times reports that phone call records found by investigators show that on the night of February 14, 2025, when LIBRA went live, Milei had seven calls with Novelli, a figure from the project team, with the timing covering the period before and after he published the promotional posts. The phone forensics information also includes documents that appear to involve payment recordings and draft funding arrangements.

Q: What legal consequences is Milei currently facing?

A: Milei has already been hit with a collective lawsuit in Argentina over promoting the LIBRA token, with opposition lawmakers repeatedly pushing for impeachment proceedings. A federal investigation has listed Milei as a “person of interest.” On the U.S. side, law firms have also filed criminal lawsuits with the Department of Justice and the FBI, accusing the LIBRA team of cross-border securities fraud.

Q: What long-term impacts could the LIBRA scandal have on the crypto industry?

A: The incident may significantly reduce investors’ trust in celebrity-endorsed tokens, while also prompting regulators in various countries to strengthen scrutiny of similar issuance models. After the LIBRA incident, liquidity on the Solana chain fell sharply, and overall activity in the Meme coin sector was also hit.

Q: How can you identify similar risks in politically endorsed tokens?

A: Investors should pay attention to the following: whether the project has publicly available technical whitepapers and compliance assurances; whether the team identity is transparent; whether the on-chain liquidity pool has abnormal locking mechanisms; whether there is a rapid “tweet—pump—cash out” tempo; and whether the project team operates across multiple jurisdictions to evade regulation.