Dressed in ball gowns, tuxedos and “Make Bitcoin Great Again” baseball caps, a crowd of some of the country’s most powerful cryptocurrency executives gathered a few blocks from the White House for a lavish party three days before President Trump’s inauguration, toasting an incoming administration that had vowed to promote the industry’s interests.
Even Snoop Dogg joined the festivities, offering a rendition of “Don’t Stop Believin.’”
But the crypto millionaires and billionaires were caught off guard by what happened next.
At 9 p.m. on Jan. 17, with the festivities in full swing, Mr. Trump announced on social media that he was launching a new cryptocurrency — a so-called memecoin known simply as $Trump.
The surprise disclosure raised fresh ethics and legal concerns about the ways in which Mr. Trump continues to cash in on his power and fame, in this case by marketing a digital asset in an inherently volatile and speculative market to millions of his followers.
And it set off a wave of criticism from inside the industry that he says he wants to champion.
Crypto executives criticized the move as a cash grab, saying that Mr. Trump had undercut the industry’s credibility at the very moment when proponents were seeking a more prominent place for digital currencies in mainstream finance and business.
His venture, they said, created a brief and highly publicized bubble that partly deflated within a few days even as Mr. Trump’s family and its business partners collected millions of dollars from fees on purchases and sales of the coin.
“It makes it all look corrupt and self-interested,” said Nic Carter, a vocal supporter of Mr. Trump who runs the crypto investment firm Castle Island Ventures and was at the Crypto Ball as the new $Trump coin was announced.
An analysis by the crypto forensics company Chainalysis showed that the majority of people who bought $Trump were likely inexperienced retail investors, possibly dabbling in crypto for the first time. These traders “roughly broke even,” the analysis said, though more than 100,000 of them lost money.
Yet by one estimate, the launch of $Trump generated $58 million in fees for the Trump family in less than a day. As of Friday night, the family also owns, at least on paper, $23 billion worth of $Trump at its $29 price — already a 60 percent drop from the peak. That price would crash even further if the family did a so-called rug pull and moved to rapidly sell off its holdings.
Asked about the coin’s launch on Tuesday at the White House, Mr. Trump said, “I don’t know much about it.”
But even after the inauguration, he continued to repost the celebratory announcement of the $Trump token — effectively urging more people to buy the coin after its price collapsed.
Ryan Selkis, a crypto entrepreneur who was one of the president’s earliest supporters in the industry, said on social media that the memecoin episode would cost the Trump administration “a lot of $ and goodwill.”
“Trump needs to fire his crypto advisors, from top to bottom and replace with people who know what they are doing,” another crypto executive, Gabor Gurbacs, wrote on X after the coin’s price plummeted.
The memecoin launch was the first time the Trump family had issued a digital currency that any investor could buy or sell on crypto exchanges. But the plan, one Trump Organization executive said, grew out of an earlier effort organized in part by Bill Zanker, a serial entrepreneur and friend of Mr. Trump’s who has previously sold back rubs, gym equipment and self-help courses.
Mr. Zanker and the Trump family began selling $99 digital trading cards in 2022 depicting Mr. Trump as a superhero in a crypto-based format known as a nonfungible token, or NFT.
But NFTs, at least in theory, serve as digital artwork or collectibles, whereas the Trump token was treated by buyers more like GameStop shares, the so-called meme stock that many amateur traders bought in recent years in hopes of earning a quick profit.
A onetime crypto skeptic, Mr. Trump embraced the industry on the campaign trail last year, promising to end the Biden administration’s regulatory crackdown on crypto firms.
“We’re going to make a lot of money for the country,” Mr. Trump said on Thursday as he signed an executive order at the White House pledging to promote the crypto industry.
It’s a business in which Mr. Trump has a substantial personal stake. In September, he and his sons helped start World Liberty Financial, a company designed to facilitate borrowing and lending in digital currencies.
And since his election victory, Mr. Trump has made a series of personnel selections at regulatory agencies that seem poised to help the industry.
In an interview on Friday, Eric Trump, the president’s middle son, dismissed criticism of the decision to release the $Trump tokens and questions about whether it was a conflict of interest for the Trump family to be introducing its own digital currency while President Trump is appointing financial regulators.
“The $Trump trading card and World Liberty Financial are two of the most successful projects in crypto history,” he said.
The Crypto Ball was promoted as a celebration of the industry’s political success — the sort of party that crypto enthusiasts usually throw on yachts and beaches, just transplanted to an auditorium a 15-minute walk from the White House.
It was also an opportunity for top crypto executives to network with some of the most influential figures in Washington. Fred Thiel, the chief executive of the Bitcoin mining firm Marathon Digital Holdings, chatted with House Speaker Mike Johnson, who sent a text to President Trump right in front of him. “Everyone was very pumped,” Mr. Thiel said in an interview.
But it turned out the most important action in the crypto market was happening on social media. “Trump Meme is HERE!” Mr. Trump wrote on Truth Social and X as Snoop Dogg took the stage. “It’s time to celebrate everything we stand for: WINNING!”
Proponents of digital currencies say they can grow into a widely used means of exchange, allowing instant transfers of wealth efficiently and privately, outside the traditional banking system. Memecoins, a type of digital currency based on a joke or a celebrity mascot, are controversial in the crypto world. They have no practical utility and are often deployed in pump-and-dump schemes or other scams.
But traders with good instincts can generate quick profits — if they buy quickly as the price is rising and then sell their holdings before earlier buyers cash out.
Josh Bailey, a crypto trader in Austin, Texas, saw Mr. Trump’s announcement almost immediately after it was posted. At first, he wasn’t sure if it was real. “The president of the United States launching a memecoin,” Mr. Bailey said. “I was not expecting that.”
Soon the coin’s price was surging. Within a few hours, the total value of all the $Trump in circulation was more than $5 billion. Mr. Bailey decided to put in $12,000. By the time he cashed out, his trove had more than quintupled in value.
By Sunday morning, Mr. Trump’s coin was among the most valuable cryptocurrencies in the world, and his partnership’s holdings were worth more than $50 billion on paper. A business entity controlled by Trump Organization and its partners owned 80 percent of the coins and collected fees as the coins were traded.
Eric Trump, in a social media post, hailed the new investment as “the hottest digital meme on earth.”
Already, though, Mr. Trump’s crypto supporters were growing frustrated. Many of the people who attended the Crypto Ball were effectively cut out of the moneymaking opportunity, unable to buy the coin early enough to profit because they were out partying rather than online.
“I’m legitimately heated about it,” Mr. Carter said. “Why wouldn’t they just do an announcement over the speakers?”
Then, on Sunday afternoon, a post appeared on Melania Trump’s X account: She was launching a memecoin of her own, essentially creating a competitor in the market. The price of $Trump plummeted by 60 percent over the next day.
Suddenly, the industry’s enthusiasm for Mr. Trump turned to fury.
Justin Bons, a crypto executive, said the back-to-back memecoin announcements were “nothing more than blatant money grabs.” Another trader said he was “missing Gary Gensler right now,” a reference to the former Securities and Exchange Commission chair who filed numerous lawsuits against crypto companies.
The new Trump token also quickly generated legal questions, centering on whether it constituted a security and should have been subject to federal disclosure and registration requirements.
The $Melania tokens “are digital collectibles,” the family said as it announced the offering, “not intended to be, or to be the subject of, an investment opportunity.” But trading patterns show that this was not how buyers treated these tokens — buying and selling them in most cases in an effort to make money.
During the Biden administration, the S.E.C. under Mr. Gensler adopted an aggressive posture toward cryptocurrencies, arguing that the vast majority of them were securities that should be closely regulated.
In 2023, the S.E.C. accused the backers of a cartoon NFT series called Stoner Cats of selling an unregistered security after the images were marketed in a way that “led investors reasonably to expect to profit from the managerial and entrepreneurial efforts of” the backers.
Allison Herren Lee, a former S.E.C. commissioner, said that during her tenure the new Trump-family coins would certainly have generated a staff review to evaluate if they complied with the law.
“That analysis does not turn on whether the promoters call it a security,” she said. “It turns on whether it’s marketed as an investment, meaning generally that purchasers will get a return based on the efforts of others.”
Democrats in Congress, including Senator Elizabeth Warren of Massachusetts, have already written a letter to federal regulators asking them to investigate the matter.
But opening such an inquiry now would effectively require the S.E.C. to investigate the family of a president who just nominated the agency’s chairman — an experienced securities lawyer with close ties to the crypto industry.
David Sacks, a venture capitalist whom Trump appointed to oversee his administration’s tech policy, said this week that the coin was “like a baseball card or a stamp” and “totally fine” to sell.
It is already clear that some of the buyers of the $Trump token jumped too slowly and ended up losing money. During one series of trades, an investor using the pseudonym Ansem spent $9 million in cryptocurrency to buy $Trump just before it fell in value, and then sold the holdings two hours later at a roughly $2 million loss, according to public transaction records first identified by an account called Lookonchain.
Still, over the next few days, the Ansem account continued trading $Trump, the records show, perhaps in hope of making up the loss.
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