Milei caught in a crypto spider web

The already tumultuous pace of Argentina’s news cycle, accelerated already by the emergence of Javier Milei, was put on turbo-speed this week

Argentine President Javier Milei is facing his first major political crisis after being accused of involvement in a cryptocurrency scam. The scandal, dubbed “$LIBRA,” has hit hard both at home and abroad, with Milei's sister, Karina, being directly accused of receiving improper payments.

The scam, which aimed to raise funds for Argentine technology entrepreneurs, involved a group of individuals putting together a memecoin named $LIBRA, which were then sold to investors through a method known as a "rug pull." Hayden Mark Davis, a young United States national, was at the center of the operation, which also included his family firm, Kelsier Ventures.

Davis, who is known for his involvement in several seemingly fraudulent token launches, including $LIBRA and even the official $MELANIA token, played a key role in structuring the memecoin launches, which are typically connected with a celebrity, meme, or digital trend.

Together with his family members, who were also involved in the crypto world, Davis and Kelsier Ventures managed to generate massive profits via insider trading, using automated bots to buy and sell the tokens as they were being released to the public and taking early advantage of a humongous price wave to make millions.

The scheme involved enlisting major celebrities to attract demand for the token, which were then being bought and sold by the insiders in a way that maximized their profits. This method, which is illegal in most jurisdictions, allowed them to make hundreds of millions of dollars, while the vast majority of those who participated in the launches suffered terrible losses.

According to an investigation by crypto platform Arkham, 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.

The scandal has also implicated several domestic players, including Mauricio Novelli and Manuel Terrones Godoy, two of the organizers 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.

The 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