‘I have never seen such open corruption': Trump's crypto deals and loosening of rules shock observers

The Guardian

6 days ago

Cryptocurrency multibillionaire Justin Sun could barely contain his glee.
Last month, Sun publicly flaunted a $100,000 Donald Trump-branded watch that he was awarded at a private dinner at Trump's Virginia golf club. Sun had earned the recognition for buying $20m dollars of the crypto memecoin $Trump, ranking him first among 220 purchasers of the token who received dinner invitations.
Trump's much-hyped 22 May dinner and a White House tour the next day for 25 leading memecoin buyers were devised to spur sales of $Trump and wound up raking in about $148m, much of it courtesy of anonymous and foreign buyers, for Trump and his partners.
Memecoins are crypto tokens that are often based on online jokes but have no inherent value. They often prove risky investments as their prices can fluctuate wildly. The $Trump memecoin was launched days before Trump's presidential inauguration, spurring a surge of buyers and yielding tens of millions of dollars for Trump and some partners.
Trump's private events on 22 May to reward the top purchasers of $Trump have sparked strong criticism of the president from ethics watchdogs, ex-prosecutors and scholars for exploiting his office for personal gain in unprecedented ways. But they fit in a broader pattern of how Trump has exploited the power and lure of his office to enrich himself and some top allies via cryptocurrencies.
'Self-enrichment is exactly what the founders feared most in a leader – that's why they put two separate prohibitions on self-benefit into the constitution,' said former federal prosecutor Paul Rosenzweig. 'Trump's profiting from his presidential memecoin is a textbook example of what the framers wanted to avoid.'
Scholars, too, offer a harsh analysis of Trump's crypto dealings.
'I have never seen such open corruption in any modern government anywhere,' said Steven Levitsky, a professor of government at Harvard University and an expert on authoritarian regimes who co-authored the book How Democracies Die.
Such ethical and legal qualms don't seem to have fazed Trump or Sun. The pair forged their ties well before the dinner as Sun invested $75m in another Trump crypto enterprise, World Liberty Financial (WLF), that Trump and his two older sons launched last fall and in which they boast a 60% stake.
The Chinese-born Sun's political and financial fortunes, as well as those of other crypto tycoons, have improved markedly since Trump took office and moved fast to loosen regulations of cryptocurrency ventures at the Securities and Exchange Commission (SEC), the justice department and other agencies to upend Joe Biden's policies.
As the SEC has eased regulations and paused or ended 12 cases involving cryptocurrency fraud, three Sun crypto companies that were charged with fraud by an SEC lawsuit in 2023 had their cases paused in February by the agency, which cited the 'public interest' and reportedly has held settlement talks.
Trump's and Sun's mutually beneficial crypto dealings symbolize how the US president has boosted his paper wealth by an estimated billions of dollars since he returned to office, and worked diligently to slash regulations fulfilling his pledges to make the US the 'crypto capital of the planet' and end the 'war on crypto'.
After the 22 May dinner, Sun posted: 'Thank you @POTUS for your unwavering support of our industry!'
Although Trump's crypto ventures are less than a year old, the State Democracy Defenders Fund watchdog group has estimated that as of mid-March they are worth about $2.9bn.
In late March, Reuters revealed that WLF had raised more than $500m in recent months and that the Trump family receives about 75% of crypto token sales.
Trump's pursuit of crypto riches and deregulation represents a big shift from his comments to Fox News in 2021, when he said that bitcoin, a very popular crypto currency, 'seems like a scam'.
In July 2019, Trump posted that 'Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade', and noted that their value was 'highly volatile and based on thin air'.
Now, Trump's new pro-crypto policies have benefited big campaign donors who lead crypto firms as well as Elon Musk, the world's richest person, who spent almost $300m to help elect Trump, and who boasts sizable crypto investments in bitcoin through his electric car firm Tesla and his other ventures. Though Trump and Musk have since fallen out, the mogul's crypto fortunes seem to have improved due to the president's deregulatory agenda.
Trump's special envoy to the Middle East, Steve Witkoff, is a real estate billionaire who helped found WLF, in which he has a stake; Trump's two oldest sons, Eric and Don Jr, and Witkoff's son Zach have played key roles promoting WLF in the Middle East and other places.
Trump's use of his Oval Office perch to increase his wealth through his burgeoning crypto businesses while his administration rapidly eases regulations is unprecedented and smacks of corruption, say scholars, many congressional Democrats and some Republicans.
'To me, Trump's crypto dealings seem pretty explicit,' Julian Zelizer, a Princeton University professor who focuses on political history, told the Guardian. 'Policy decisions are being made regarding parts of the financial industry that are being done not to benefit the nation, but his own financial interests … It's hard to imagine what he's doing benefits the nation.'
Rosenzweig stressed that 'not only do Trump's extravagant crypto ventures benefit him personally as his administration slashes crypto regulations and takes pro-crypto steps at the SEC; they also benefit his tech bro backers who will take full advantage of the end of regulatory enforcement'.
In Congress, leading Democrats, including Richard Blumenthal, a senator from Connecticut, and Jamie Raskin, a representative from Maryland, in May announced separate inquiries by key panels in which they are ranking members into Trump's crypto dealings, and attacked Trump for using his office to enrich himself via his crypto operations.
'With his pay-for-access dinner, Trump put presidential access and influence on the auction block,' Blumenthal told the Guardian. 'The scope and scale of Trump's corruption is staggering – I'll continue to demand answers.'
Last month, too, the Democratic senator Jeff Merkley, from Oregon, and the Senate minority leader, Chuck Schumer, introduced the 'end crypto corruption' bill, which 22 other Democrats have endorsed.
'Trump's crypto schemes are the Mount Everest of corruption,' Merkley told the Guardian. 'We must ban Trump-style crypto corruption so all elected federal officials – including the president, vice-president and members of Congress – cannot profit from shady crypto practices,' which his bill would curtail.
Some former congressional Republicans are also incensed by Trump's blatant use of his presidency to peddle $Trump. 'Nobody should be allowed to use their public positions while in office to enrich themselves,' said ex-Republican congressman Charlie Dent of Pennsylvania, who once chaired the House ethics panel. 'A member of Congress would not be permitted to engage in the kind of memecoin activities which the president has been doing.'
Trump and his family have dismissed critics concerns about the 22 May events and his other crypto ventures.
Before the 22 May dinner, Trump's press secretary, Karoline Leavitt, told reporters that the president would attend his crypto gala in his 'personal time' and it was not a White House event, but declined to release names of the many anonymous and foreign attendees.
To allay criticism, the Trump Organization said in January that Trump's business interests, including his assets and investments, would be placed in a trust his children would manage and that the president wouldn't be involved in decision-making or daily operations. Trump's family also hired a lawyer as an ethics adviser.
But those commitments have been dwarfed by Trump's public embrace of his crypto ventures and strong deregulatory agenda. In March, for instance, Trump hosted the first-ever 'crypto summit' at the White House, which drew a couple dozen industry bigwigs who heard Trump promise to end Biden's 'war on crypto'.
Trump's crypto critics worry that the president's strong push for less industry regulation may create big problems: the crypto industry has been battered by some major scandals including ones involving North Korean hackers and has been plagued by concerns about industry's lack of transparency and risks.
For instance, a report last December by leading research firm Chainalysis found that North Korean hackers had stolen $1.34bn of cryptocurrency in 2024, a record total and double what they stole the year before.
The report concluded that US and foreign analysts believe the stolen funds were diverted in North Korea to 'finance its weapons of mass destruction and ballistic missile programs'.
Other crypto fraud schemes in the US have spurred loud alarms.
In an annual report last September, the FBI revealed that fraud related to crypto businesses soared in 2023 with Americans suffering $5.6bn in losses, a 45% jump from the previous year.
Sam Bankman-Fried, who founded the now bankrupt FTX crypto exchange, was sentenced to 25 years in prison in March 2024 by a New York judge for bilking customers out of $8bn.
Nonetheless, a justice department memo in April announced it was closing a national cryptocurrency enforcement team that was established in 2022, which had brought major crypto cases against North Korean hackers and other crypto criminals.
The memo stressed that the justice department was not a 'digital assets regulator' and tried to tar the Biden administration for a 'reckless strategy of regulation by prosecution'. The memo stated that a pro-crypto Trump executive order in January spurred the justice department's policy shift.
Ex-prosecutors and ethics watchdogs worry increasingly that crypto scandals and conflicts of interest will worsen as the Trump administration moves fast to ease crypto oversight at the justice department, the SEC and other agencies.
Some of WLF's high-profile crypto deals have involved overseas crypto firms which have had recent regulatory and legal problems in the US, fueling new concerns, watchdogs and ex-prosecutors say.
One lucrative deal raised eyebrows when WLF was tapped to play a central role in a $2bn investment by Abu Dhabi financial fund MGX that is backed by the United Arab Emirates in the world's largest crypto exchange, Binance.
As part of the deal, the Abu Dhabi fund bought $2bn of a WLF stablecoin, dubbed USD1, to invest in Binance. Stablecoins are a popular type of cryptocurrency that are often pegged to the dollar.
The WLF deal comes after Binance in 2023 pleaded guilty to violating US money-laundering laws and other violations and the justice department fined it a whopping $4bn.
Furthermore, Binance's ex-CEO and founder, Changpeng Zhao, pleaded guilty in the US to violating the Bank Secrecy Act and failing to maintain an effective anti-money-laundering program.
Zhao, who still owns 90% of Binance, served a four-month jail term last year.
WLF's $2bn deal was announced at an Abu Dhabi crypto conference on 1 May that drew Eric Trump two weeks before President Trump's visit to the UAE capital, sparking concerns of foreign influence and ethics issues.
Increasing WLF's ties further with Binance, the crypto exchange announced on 22 May that it had begun listing the stablecoin for trading purposes. Binance got some good news at the end of May, too, when the SEC announced the dismissal of a civil lawsuit it filed in 2023 against the exchange for misleading investors about surveillance controls and trading irregularities.
Paul Pelletier, a former acting chief of the justice department's fraud section, noted that SEC moves back in February 'to emasculate its crypto enforcement efforts sent crypto fraudsters a welcome mat of impunity'.
He added: 'The recent dismissal of the SEC's lawsuit against Binance for mishandling customer funds, days after it began listing the Trump family's cryptocurrency on its exchange, seemed to be the natural consequence of such enforcement laxity. Victims be damned.'
Other agency deregulatory moves that favor crypto interests can boost Trump's own enterprises and his allies, but pose potential risks for ordinary investors, say legal scholars.
Columbia law professor Richard Briffault noted that as part of the Trump administration's wide-ranging and risky crypto deregulatory agenda which can benefit Trump's own crypto ventures, the Department of Labor in late May nixed a Biden-era 'extreme care' warning about 401K plans investing in crypto.
'[The labor department] has rescinded the red light from the Biden years for 401K retirement plans, which is another sign of the Trump administration's embrace of crypto,' Briffault said.
Briffault, an expert on government ethics, has told the Guardian more broadly that Trump's crypto ventures and his 22 May memecoin bash are 'unprecedented'.
'I don't think there's been anything like this in American history,' he said. 'Trump is marketing access to himself as a way to profit his memecoin. People are paying to meet Trump and he's the regulator-in-chief. It's doubly corrupt.'
In late May, in a new crypto business twist, the Trump Media and Technology Group, the parent of Truth Social, said it had sealed a deal to raise $2.5bn to be used to buy bitcoin, creating a reserve of the cryptocurrency.
Meanwhile, Trump's stablecoin fortunes and those of many industry allies could get boosts soon from a Senate stablecoin bill, dubbed the 'genius act', that's poised to pass the Senate on Tuesday but which critics have said loosens regulatory controls in dangerous ways unless amended with consumer protections and other safeguards.
Senators Merkley and Elizabeth Warren, of Massachusetts, led unsuccessful efforts to amend the bill to thwart potential criminal abuses, protect consumers and prevent Trump from using his office to profit his crypto businesses.
'The 'genius act' fails to prevent sanctions evasion and other illicit activity and lets big tech giants like Elon Musk's X issue their own private money – all without the guardrails needed to keep Americans safe from scams, junk fees or another financial crash,' Warren told the Guardian.
'Donald Trump has turned the presidency into a crypto cash machine,' Warren said. The Genius act, Warren stressed, should have 'prohibited the President AND his family from profiting from any stablecoin project.'
More broadly, Kedric Payne, the general counsel and ethics director at the Campaign Legal Center, said: 'President Trump's financial stakes in the crypto industry at the same time that he is determining how the government will regulate the industry is unprecedented in modern history. This is precisely the type of conflict of interest that ethics laws and norms are designed to stop.'