BUENOS AIRES, Argentina (AP) — Argentine President Javier Milei is currently under scrutiny due to a corruption investigation related to his endorsement of a meme coin—a highly speculative cryptocurrency that has gained traction since President Donald Trump and his wife introduced their own tokens.

This emerging controversy in Argentina has been locally termed “cryptogate,” featuring a variety of notable individuals, including a prominent U.S. influencer, a crypto developer known as “Meow,” and a 28-year-old American entrepreneur who claims to have assisted in the launch of first lady Melania Trump’s meme coin last month.

Here’s a breakdown of the situation and the current status:

What is a meme coin?

Meme coins are a form of cryptocurrency often riffing on internet memes, trending events, or celebrity culture without aiming to solve significant problems or introduce new technologies. They typically bear humorous names such as Dogecoin or Fartcoin.

Critics, including several cryptocurrency advocates, argue that they function merely as digital Ponzi schemes, benefiting insiders while causing harm to retail investors. Nonetheless, supporters contend that meme coins warrant consideration as potential indicators of how the internet could transform financial transactions and other economic activities.

“New technologies may initially seem trivial but can evolve into significant advancements over time,” said Brian Armstrong, CEO of Coinbase, in a recent social media update.

What transpired with the meme coin tied to Milei?

In brief, it resulted in chaos.

Milei, a tech-savvy and chainsaw-wielding libertarian president, announced his support for the $LIBRA meme coin on X shortly after its launch, asserting it would “encourage economic growth by backing small businesses and startups.” The price of the coin skyrocketed, briefly pushing the project’s market valuation above $4 billion.

However, only a few hours post-launch, early investors began to sell their holdings, leading to a dramatic price drop.

This price fluctuation exhibited the typical characteristics of a “rug pull,” a frequent occurrence in the meme coin landscape. In these situations, insiders liquidate their assets when the value of newly introduced meme coins surges, causing substantial losses for new investors.

Following the abrupt decline, Milei deleted his initial post and sought to distance himself from the endeavor. By the following Monday, a multitude of criminal complaints had emerged, prompting a judge in Argentina to initiate an investigation into fraud allegations. The main opposition party in Argentina has also called for his impeachment.

A federal prosecutor officially commenced an inquiry to ascertain the roles of Milei and five others in the creation and promotion of $LIBRA, focusing on potential offenses such as bribery, fraud, abuse of authority, and influence peddling.

In a defiant stance, Milei claimed he acted in good faith, requesting the Justice Ministry’s Anti-Corruption Office to investigate himself and others for possible misconduct.

Who are the significant players involved?

Hayden Davis, a 28-year-old American crypto developer and alleged adviser to Milei who reportedly contributed to the $LIBRA launch, has emerged as a pivotal figure in this saga. Milei’s office maintains that there is no association between the government and Davis.

In an interview with independent crypto journalist Stephen Findeisen, Davis expressed that meme coins often represent a rigged system that serves a select few at the expense of general investors.

“It’s an insiders’ game. This is an unregulated casino,” Davis commented.

Davis contended that the $LIBRA initiative was not intended as a rug pull but rather aimed to illustrate the potential and utility of digital currency, aligning with Milei’s vision for Argentina as a center for innovation. Additionally, he noted that he was also involved in the launch of Melania Trump’s meme coin, which similarly experienced a rapid rise followed by a decline.

Who else played a role?

Renowned online influencer Dave Portnoy, creator of Barstool Sports, disclosed that Davis informed him of the upcoming $LIBRA launch prior to its public unveiling and asked him to promote it. Portnoy mentioned that there were talks of interviewing Milei, akin to his previous interactions with President Donald Trump during Trump’s initial term. Although Portnoy didn’t invest in $LIBRA until after Milei’s announcement, he endured financial losses when the coin’s value plummeted, which Davis claimed he reimbursed.

The anonymous co-founder known as Meow, associated with the crypto firm behind $LIBRA, asserted via social media that they were confident no insider trading or financial misconduct occurred within their team. Nonetheless, Meow shared that they had engaged a law firm for an independent investigation, leading to the resignation of one of the company’s leaders for demonstrating “a lack of judgment.”

What lies ahead for Milei?

Cryptogate represents the inaugural significant scandal of Milei’s presidency. Analysts caution that this situation could undermine public trust in Milei, who has positioned himself as an unconventional economist dedicated to addressing Argentina’s rampant inflation and curtailing corruption among political elites.

The ramifications of this issue for the Milei administration’s reputation among foreign investors remain uncertain, particularly as the government seeks to relax stringent currency controls and secure a loan from the International Monetary Fund. Currently, Milei is in Washington meeting with Tesla’s CEO Elon Musk and other influential tech leaders to build momentum for his economic reforms.

Are meme coins here to stay?

While meme coins may not be disappearing in the near future, their histories serve as a warning for both investors and creators. The meme coins promoted by Trump and Melania have experienced significant declines since launch and have faced scrutiny from some Democrats and crypto advocates.

Hailey Welch, known publicly as Hawk Tuah Girl, saw her popularity wane after her meme coin’s values fell amidst claims of a rug pull. Celebrity Caitlyn Jenner faces an ongoing class-action lawsuit from investors who allege they were misled into losing funds on the $JENNER meme coin. Both Welch and Jenner have denied any wrongdoing.

Additionally, the economically struggling Central African Republic recently issued a meme coin. After a brief surge, its value also plummeted.

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Suderman contributed from Richmond, Virginia.