A Crypto Scam Swindled Argentines. What Did the President Know?

New York Times

28-02-2025

The scandal began with a tweet.
'The world wants to invest in Argentina,' Javier Milei, Argentina's president, posted at 7:01 p.m. on Valentine's Day, offering a code to buy a new cryptocurrency.
The digital coin was called $Libra, and it had been created 23 minutes earlier.
Over the next few hours, thousands of people invested. $Libra's value skyrocketed.
Then it swiftly collapsed. The largest stakeholders had sold their coins, leaving almost everyone else with a collective $250 million in losses.
To cryptocurrency veterans, it was a classic 'rug-pull.' A celebrity touts a new digital coin, prices soar and then insiders who own most of the coins pull the rug: They sell their stakes for a big profit at the expense of amateur investors who got in later.
To Argentina, it was a national scandal. The president, critics said, had just scammed his constituents. The opposition called for impeachment. Argentine citizens filed a dozen criminal complaints. A federal prosecutor opened an investigation, with Mr. Milei as a target.
Then Mr. Milei left for Washington. At the Conservative Political Action Conference on Saturday, he gave a combative speech ahead of President Trump, the other president who promoted a new cryptocurrency this year that soared and then crashed. That coin, $Trump, generated enormous profits for insiders and a cumulative $2 billion in losses for more than 800,000 other investors.
Mr. Trump has claimed ignorance. 'I don't know if it benefited' me, he said. 'I don't know much about it.' (The Trump family and its business partners earned nearly $100 million in trading fees alone on the coin.)
Following the ballooning $Libra scandal in Argentina, Mr. Milei took a similar approach. He did not earn a cent, he said. Instead, he blamed a small start-up in Singapore, KIP Protocol, that few in the crypto industry had heard of.
'You'll notice that the company that organized the launch, KIP, explicitly stated that I had nothing to do with it,' he said in a prime time interview last week.
But Mr. Milei's story has begun to unravel, showing how crypto and politics have increasingly blended to enrich the powerful and take from most everyone else.
The origins of the $Libra scandal trace back to a conference in Argentina last year, where an American crypto consultant and an Argentine business partner of Mr. Milei tried to sell access to the president, according to interviews and documents reviewed by The New York Times. It eventually led to meetings in the presidential offices and a planned partnership with Dave Portnoy, the founder of Barstool Sports.
Since the crash, evidence has emerged contradicting the president's claims; critics in Argentina have accused his inner circle of taking bribes; and the American consultant, whom Mr. Milei last month referred to as an adviser, has admitted to amassing $100 million from the scheme.
'This is an insider's game,' the American consultant, Hayden Davis, said about crypto coins in a video last week. 'This is like an unregulated casino.'
'A little something-something'
The crypto world was excited about Mr. Milei.
A libertarian economist, he had said he wanted to open his financially scarred nation to new currencies. So when it was announced that he would speak at a crypto conference in Buenos Aires in October, industry leaders descended.
The conference was organized by Mauricio Novelli, a polished 29-year-old stock trader with yearslong connections to Mr. Milei.
In 2020, Mr. Milei began teaching at Mr. Novelli's small investing academy and became the school's pitchman, posting repeatedly about it online, up until he was president. In 2022, he posted about a new crypto project from Mr. Novelli, calling it 'an economic model that's sustainable over time.' Not long after, it collapsed.
At the conference, Mr. Novelli was charging sponsors $50,000 for a speaking slot and a meet-and-greet with Mr. Milei, according to four attendees who paid the fee.
Yet those people said the meeting with the president turned out to be a quick group photo. To get more time, two of them said, conference organizers told them it would cost more.
'They'd say, 'Hey, you know, give us a little something-something and we can get you a meeting,' said Charles Hoskinson, a cryptocurrency billionaire who founded one of the industry's largest platforms, Cardano.
Another attendee said Mr. Novelli offered a meeting with the president if the person signed a $500,000 contract for vague 'consulting services,' according to a copy of the document viewed by The Times.
But Mr. Novelli was not the only one selling access to Mr. Milei.
Mr. Davis — a 28-year-old with curly blonde hair and garish gold glasses whom Mr. Novelli had met at a crypto event in Denver — was also telling conference attendees that he had 'control' over Mr. Milei and could broker deals, according to messages viewed by The Times.
'Everything from Milei tweeting' to 'all the front-facing Milei stuff basically, showing up at things, et cetera — I have control over a lot of those levers,' Mr. Davis said in an audio message to an entrepreneur, obtained by The Times.
'But,' he added, 'there's a cost.' He insinuated that cost could be in the millions of dollars. 'I'm not trying to screw anyone over,' he said, using an expletive.
Another entrepreneur said Mr. Davis made an even more brazen offer in writing: He would deliver a meeting with Mr. Milei and a partnership with the Argentine government in exchange for roughly $90 million in cryptocurrencies over 27 months, according to a copy of the proposal viewed by The Times.
There is no evidence that Mr. Milei was aware of the proposals. Mr. Davis and Mr. Novelli, through spokesmen, declined to comment.
Three months before the conference, in July, Mr. Novelli and Mr. Davis visited Argentina's presidential offices, according to government records obtained by the Argentine newspaper La Nación. The records show their host was the president's sister and chief of staff, Karina Milei.
In November, they visited the presidential offices again. Afterward, Mr. Novelli and Mr. Davis toasted with champagne at the Four Seasons in Buenos Aires, telling others they had just signed a deal with the president, according to La Nación.
Then, on Jan. 30, Mr. Milei posted a photo of himself and Mr. Davis, saying the American 'was advising me on the impact and applications of' crypto-related technology.
'The KIP Protocol project'
Two weeks after that post, a tech entrepreneur in Singapore got an unexpected call from Mr. Novelli.
The entrepreneur, Julian Peh, founder of a start-up called KIP Protocol, said he had met Mr. Novelli at the October conference. Mr. Peh was one of the few attendees who actually got a sit-down meeting with Mr. Milei. (He said he paid only to sponsor the event.)
But over the next few months, Mr. Peh said, he had no contact with the Argentine president or his office. Then Mr. Novelli called him on Feb. 13 to pitch him on a new project, he said: the launch of a cryptocurrency called $Libra that would ultimately finance small businesses in Argentina.
Mr. Novelli described a plan that involved Mr. Davis launching $Libra and Mr. Peh's company, KIP, distributing funds to businesses, Mr. Peh said.
It was not his company's forte — KIP built technology related to artificial intelligence. But Mr. Peh said he agreed anyway.
A day later, $Libra launched with Mr. Milei's tweet. The president linked to a website describing the $Libra project as having 'a clear mission: to boost the Argentine economy.' At the bottom was a single disclaimer: 'Private Initiative project Developed by KIP Network Inc © 2025.'
It was before dawn in Singapore. Mr. Peh said he awoke to confused messages from colleagues: What was $Libra?
With the price crashing after the initial boom, Mr. Peh said Mr. Novelli then directed him to post a message on X supporting the coin. Mr. Novelli provided the exact text in English and Spanish, he said.
Mr. Peh said he followed the instructions. 'The $LIBRA currency has been a success. We want to thank everyone for their trust and support,' KIP's account posted. 'We would like to clarify that this is a private enterprise project, President Milei was not and is not involved in the development of this project, as he has mentioned himself. This is an entirely private enterprise.'
Two minutes later, Mr. Milei's account disowned $Libra. 'I obviously have no connection whatsoever,' his account posted on X. 'I was not aware of the project's details.' He deleted his initial post promoting $Libra.
Ten hours after that, Mr. Milei's office released a statement blaming Mr. Peh and calling $Libra the 'KIP Protocol project.' The statement said Mr. Peh had pitched the project to Mr. Milei — and that Mr. Peh had introduced the president to Mr. Davis as a KIP representative.
'Mr. Davis had no and does not have any connection with the Argentine government and was presented by the KIP Protocol representatives as one of their partners,' the president's office said.
That appeared to contradict Mr. Davis's earlier visits to the presidential offices, including before Mr. Milei and Mr. Peh met.
Mr. Novelli's company also released a statement blaming Mr. Peh and Mr. Davis for $Libra. It said he had earned nothing.
Mr. Peh said he realized that he had become the fall guy. KIP 'became a convenient party to provide cover for other parties,' the company said in a statement.
'Deeply rigged'
Part of crypto's appeal is that transactions are publicly trackable. So experts dug into $Libra — and found a mess.
More than 10,000 crypto accounts, representing 86 percent of investors, lost a combined $251 million, according to Nansen, a crypto data firm.
At the same time, the data showed that accounts connected to $Libra's launch reaped enormous sums.
Typically, creators of a new cryptocurrency control a large percentage of the supply. But rules programmed into the currency often block those shares from being sold for a set period of time, preventing insiders from taking profits and crashing the price.
However, the crypto accounts that created $Libra could sell immediately. Within hours, those accounts — which controlled 80 percent of the coins — had cashed out nearly $90 million, according to Bubblemaps, a crypto analysis firm.
Another $33 million in profits went to accounts that were created just hours before the launch — and that then quickly bought and sold $Libra after its release — suggesting that whoever controlled them may have known the coin was coming.
Investors were furious. 'It was not only about the losses — it was about the insider activity,' said Nicolas Vaiman, chief executive of Bubblemaps. 'It shows how deeply rigged the game was.'
'Whose money is it?'
A crypto rug-pull is usually mysterious: The money disappears, and no one knows who took it.
Yet a day after $Libra crashed, Mr. Davis came forward. 'I'm here to set the record straight,' he said in a video posted on X. 'I am indeed Javier Milei's adviser.'
Then he criticized Mr. Milei. In a statement, Mr. Davis said Mr. Peh was 'completely innocent' and that 'I can only assume that Milei's associates attempted to shift blame onto Julian to shield themselves.'
After that, he gave two interviews on YouTube, including to Dave Portnoy, the Barstool Sports founder. Mr. Portnoy said he had a deal with Mr. Davis to promote $Libra, but pulled out at the last minute. 'Thank Christ,' he said, adding an expletive.
In the interviews, Mr. Davis said he had controlled enormous amounts of $Libra and sold those stakes when prices were high. He also said the team that created Libra had quickly bought the coin right after it hit the market — a practice called 'sniping' widely viewed as deceptive in crypto circles.
Now he had control of $100 million, he said, and wanted to make things right.
'Whose money is it?' Mr. Portnoy asked.
'I mean, it's, I mean, it's, it's, it's the, I mean, it's the,' Mr. Davis replied, stammering. 'I don't know. I mean, it's definitely not mine. It's, it's Argentina's.'
There is no sign that Mr. Davis has returned any money — other than to Mr. Portnoy, who said he lost $5 million on $Libra.
In the interviews, Mr. Davis said so-called memecoins like $Libra and $Trump — crude, speculative cryptocurrencies tied to celebrities or online memes — were essentially rigged.
Data shows that some recent memecoins may have been backed by the same people.
A Bubblemaps analysis showed the crypto account that created $Libra was closely linked to the account that created $Melania, a memecoin promoted by Melania Trump that also collapsed. The two accounts were key cogs in a web of crypto wallets that transferred funds among one another, the analysis showed.
On YouTube, Mr. Davis said he was involved in $Melania but did not elaborate on his exact role.
Ms. Trump's office declined to comment.
'A careless president'
While the cryptoverse was erupting in outrage, Mr. Milei was buffeted by crisis in Argentina.
The stock market dipped. A key political ally, former president Mauricio Macri, called him 'careless.' The press labeled the scandal 'Cryptogate.'
A federal prosecutor has opened an investigation, including into Mr. Milei's conduct, and Mr. Milei ordered Argentina's anti-corruption office to investigate.
Then a more damning accusation arrived: La Nación and the crypto news site CoinDesk published text messages they said showed Mr. Davis telling someone he 'owned' Mr. Milei because 'I send $$ to his sister.'
Mr. Milei's sister has long acted as the president's gatekeeper, and he regularly refers to her as 'the boss.'
Mr. Milei's spokesman, Manuel Adorni, said bribery accusations were 'insulting.' Mr. Milei and Ms. Milei did not respond to questions from The Times. Mr. Davis has since denied paying either of them.
When asked on television if any deputy earned money on $Libra, Mr. Milei answered: 'That's not for me to say. I have full confidence in all my officials.' He backed Mr. Novelli and again blamed Mr. Peh.
Yet he added that, regardless, he had little sympathy for the scam's victims. 'If you go to a casino and lose money, what's your complaint?' he said. 'They knew very well the risks.'
Three days later, another cryptocurrency billionaire posted that he wanted to bring a new crypto conference to Argentina.
'THANK YOU VERY MUCH,' Mr. Milei replied. 'It would be a great opportunity for our country.'