The already tumultuous pace of Argentina’s news cycle, accelerated already by the emergence of Javier Milei, was put on turbo-speed this week as the ‘$LIBRA’ crypto scandal erupted. The level of damage remains incalculable, but it hit seriously both at home and abroad, delivering the Milei administration its first full-blown political crisis. Not only that, the scandal hits at the heart of the “iron triangle,” with sister Karina Milei – the president’s chief-of-staff – being directly accused of receiving improper payments, while star political advisor Santiago Caputo immolated himself as he interrupted and sought to “save” Milei from legal ridicule in a scripted interview.
The scandal has cost the government dearly, particularly as the cast of sub-crypto-world characters that put together the scam generate serious questions about the administration’s lack of judgment. At the centre of that group is a young United States national named Hayden Mark Davis, who came out of nowhere to structure a neutron bomb that has destabilised even the apparently untouchable Milei.
Davis is a bizarre character that somewhat resembles the digital version of a Bond villain, apparently unmoved by the level of destruction he leaves in his path. He has admitted his involvement in several seemingly fraudulent token launches, including $LIBRA and even the official $MELANIA token, sponsored by US First Lady Melania Trump, and is connected with suspicious operations regarding Donald Trump’s own token. He’s proven courageous by fleecing hundreds of thousands of crypto investors while using the first lady of the United States and the President of Argentina, but he’s now fallen from grace, forced into hiding with threats hanging over him.
The case is scandalous from all angles and while Milei will probably manage to survive (and even thrive) in its aftermath, the reputational damage is done. A sort of “Monica Lewinsky” moment, he would hope. Argentina’s President has defended himself by saying he was just helping to give an extra push to a technology project he thought would benefit the country, but there are little doubts that he and his entourage participated in what ended up being a major scam, in which a very small number of insiders made hundreds of millions of dollars and the vast majority of those who participated suffered terrible losses.
Davis is an expert in memecoin launches, but goes a step further. He has developed the method to effectively front-run the market and generate massive profit via insider trading. Memecoins have become hugely popular in the crypto world these days. They are purely speculative crypto-tokens tied to a celebrity, meme or digital trend, or essentially anything that can be imagined. Through his firm, Kelsier Ventures, Davis and essentially his whole family — father Tom, brother Gideon and fiancée Sydni, sister Scotlyn, and probably others — became experts at launching memecoins and orchestrating what is known as a “rug pull.” Their modus operandi consists of enlisting a major celebrity to attract demand for the token, using automated bots to buy and sell (known as sniping) as it is being released to the public and taking early advantage of a humongous price wave to make millions. This is exactly what they did with Milei and the $LIBRA coin, which effectively demonstrates coordination between the President, his entourage and the teams responsible for the crypto-asset launch. Davis didn’t act alone, he counted on technological and financial support from other firms: Meteora — whose co-founder Ben Chow was forced to resign; and KIP Protocol — run by Julian Peh.
President Milei posted on his social media that he supported the launch of the $LIBRA project as it would work as a sort of crowdfunding opportunity for Argentine technology entrepreneurs. But he chose a team of expert “ruggers” who sold him on a memecoin instead. He quickly deleted his social media post and excused himself, noting he wasn’t so sure about the project anymore. The value of the token tanked, but Davis’ Kelsier Ventures and other insiders made hundreds of millions. An investigation by crypto platform Arkham found that digital wallets associated with Kelsier were sitting on nearly US$300 million in $LIBRA, while Davis said he had another US$100 million that “belonged” to Argentina in some sort of way.
That’s where the domestic players come in. Davis was received on multiple occasions by Milei after being introduced by Mauricio Novelli and Manuel Terrones Godoy, two of the organisers of the Tech Forum that Kelsier, KPI, and others had sponsored. Novelli and Terrones Godoy were once partners with Sergio Morales, an advisor to the National Securities Commission who was previously included on the government payroll by Karina Milei. In addition, Novelli, Terrones Godoy, and Morales had charged crypto firms for access to Milei, upselling and advising on crypto-related issues. For Argentina’s substantial and pungent crypto-community, the participants and sponsors of the Tech Forum were B- and even C-listers and the idea of an “Argentina coin” being launched in the fashion of Trump’s is a simple way to dynamite credibility. This story was later surfaced by crypto-entrepreneur Diogenes Casares, who told the story of how he tried to stop the whole thing from occurring, noting that Davis and the rest of them were sketchy characters. Top crypto-players within the administration told him that there would never be an “Argentina coin.” And then it happened, and the bomb exploded.
Casares also made public an open secret within the crypto community: several trustworthy sources indicated that a cabinet member of the highest levels of Milei’s government had received US$5 million for the operation. The prime suspects for under the table payments were Novelli, Terrones Godoy, and Morales, but quickly heads started turning towards Karina. As leaked text messages began to surface online, Davis was seen telling potential investors that he could control Milei through his sister, all he needed to do was pay up and “he signs whatever I say and does what I want.” The story, broken by a major crypto publication named CoinDesk, sparked a public relations crisis, with a representative for Davis from a crisis PR firm in New York later denying that he had paid off Javier and Karina Milei, and claiming he didn’t remember ever sending those messages.
The political damage, however, was already done. A series of weird interviews on digital platforms by Davis seemingly saw him admitting to multiple financial crimes, while tying Milei and his inner circle to the whole $LIBRA operation. It forced the President to grant his own interview to friendly journalist Jonatan Viale. As he unconvincingly attempted to distance himself from the scam, things went from bad to worse. Asked about his legal strategy, he started to fumble. Santiago Caputo decided to interrupt the interview, exchanged some words with Milei, then asked Viale to cut that part. Viale assented and even joked with the so-called “Kremlin Magician,” before complying. The material would be vetted to exclude that part, it was implied. Only that it wasn’t, as the original unedited cut was “leaked” online, graphically displaying how the MIlei administration’s communications machine manipulates the media. The scandal had grown exponentially, dragging in Milei, his sister and his favourite advisor.
Multiple investigations are already under way. The Anti-Corruption Office, controlled by the Executive, is conducting its own, while federal judge María Romilda Servini is in charge of another (on Thursday, she tasked Prosecutor Eduardo Taiano with pursuing the probe). Overseas, the US Securities and Exchange Commission (SEC) and the Federal Bureau of Investigation (FBI) have opened probes. While they are in early stages, it is difficult to imagine that several of the key players, particularly the crypto-firms and their key players, will escape prosecution. As for Milei and his entourage, they’ll face public scrutiny, but will probably manage to avoid the US courts, at least if his friends in the White House have any pull. Early opinion polls show that the situation reflects badly on Milei, particularly among more centrist voters, which of course is troubling for the government in an election year. Looking to quickly turn the page, Milei jetted off to the United States, taking Karina and Santiago Caputo with him, probably hoping that distance will soothe his wounds.
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