Argentina’s President Javier Milei under investigation over controversial crypto coin LIBRA; impeachment calls grow

Argentina’s controversial President, Javier Milei, is in soup. Milei, known for his gruff, on the face style of leadership, is facing a formal investigation following his controversial endorsement of the little-known cryptocurrency LIBRA. LIBRA saw its value soar and then crash immediately, sparking accusations of fraud and calls for impeachment. Crypto observers since have called the scheme as 'pump-and dump'.

A pump and dump in cryptocurrency refers to a manipulative trading scheme where the price of a cryptocurrency is artificially inflated (the "pump") by coordinated efforts to hype up the token, often through social media, influencers, or misleading endorsements. This creates a surge in demand, driving up the price. Once the price has risen significantly, the orchestrators of the scheme, who hold large amounts of the cryptocurrency, sell off their holdings (the "dump") at the inflated price.

This sudden sell-off causes the price to crash, leaving new investors who bought in during the "pump" with significant losses, while those who orchestrated the scheme walk away with profits. Pump and dump schemes are illegal in most financial markets and are considered fraudulent.

The Argentina government has now set up a task force to examine the situation and determine whether Milei or others acted illegally.

On February 14, Milei took to social media platform X to promote LIBRA, suggesting that it could serve as a solution to boost Argentina's struggling economy and support small businesses.

The endorsement resulted in a massive surge in the token’s market capitalization, briefly reaching over $4 billion. However, this surge was short-lived.

The LIBRA token’s rapid rise was suspicious from the start. According to news reports, the project lacked a coherent financial model, and its website was launched just hours before Milei's endorsement. Within the first three hours, over $87 million was withdrawn from the token, suggesting a lack of transparency and preparation. By the time the token's value peaked, insiders had already made over $100 million in profits. The token's value then plummeted, showing clear signs of market manipulation.

The situation quickly caught the attention of critics. The Kobeissi Letter, a well-known financial analysis firm, reported that large holders of the token liquidated their assets when the price hit its highest point, with some individuals walking away with profits of $4 million or more. At 5:40 PM ET, when the price peaked, LIBRA’s value collapsed.

In response to the backlash, Milei deleted his original promotional post and claimed that he had not fully understood the project when he first endorsed it.

He later explained that upon learning more, he decided to stop promoting the token altogether. Despite these efforts to downplay the incident, the damage was done, and critics quickly pointed to Milei’s endorsement as evidence of recklessness, if not intentional fraud.

The Argentine government has been forced to take action. In a bid to contain the fallout, Milei ordered the creation of a special Investigation Task Unit (UTI), consisting of financial experts, crypto specialists, and anti-money laundering authorities.

The government has pledged to hand over all findings to the courts, where legal proceedings will be determined.

The scandal has also ignited a political firestorm. Lawmakers across the political spectrum have denounced Milei’s actions. Argentine lawmaker Gabriela Estevez went so far as to accuse the president of engaging in a textbook "pump-and-dump" scheme.

The controversy has reached a boiling point, with some factions now calling for Milei’s impeachment. Buenos Aires Governor Axel Kicillof described the incident as a large-scale financial fraud, warning that both local and international investors had been misled by the president's endorsement. Kicillof drew comparisons to a pyramid scheme, underlining the dangers posed by such speculative assets.