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Below the fold I explain how they did it, and why the denizens of the wretched hive are not happy.
Matt Levine identified the fundamental mechanism at play here:
But you don’t have to just take your counterparties as you find them; you can work to encourage and develop bad ones. This is often a matter of product development: If you build a product that does nothing for sophisticated professionals but that is really good for noisy addicted gamblers, you will attract exactly the right sort of counterparty. This arguably explains much of crypto.The additional point he omitted is that, in order to "attract exactly the right sort of counterparty" you have to advertise the product. This will bring it to the attention of others seeking the same kind of counterparty. They will seek to leverage your product design for their own ends.
Trump has perfected the art of attracting "the right sort of counterparty". From Trump University to the banks he stiffed in his multiple bankruptcies, to the stockholders of Truth Social his counterparties have always been the "sucker at the poker table". Key to this success has always been moving on to the next scam as the previous one implodes.
By the side of the road to
Apart from the general idea that "more is better", why would these immense sums of money be attractive to this alleged billionaire? Apart from the costs of running a Presidential campaign, some of which ends up in his own pocket, there is the need to pay his legions of lawyers, and the looming judgements that these lawyers failed to avert, including $88.3M before interest to E. Jean Carroll and $454M before interest in his New York fraud case.
With Truth Social's Q2 financials reporting a loss of 1,911% of revenue, which was down 30% year-on-year, and with the stock down 80% from its peak, it was clearly time to move on.
On 31st August Jasper Goodman posted Crypto is the new Trump family business. Ethics watchdogs have concerns. rating a well-deserved "Well Duh!":
Trump’s eldest sons are gearing up to launch a new cryptocurrency venture called World Liberty Financial, which is already receiving a big social media boost from their father. Government ethics watchdogs say the project could create a conflict of interest if Trump returns to the White House next year.The headline on World Financial's "coming soon" web page is "World Liberty Financial - The Only Crypto DeFi Platform supported by Donald J. Trump". There are dozens of "DeFi Platforms", but the unique selling point of World Liberty is that it is "supported by Donald J. Trump". So the counterparties it is intended to attract are the gullible members of the Trump cult, the ones who have allegedly made him a billionaire.
Trump has vowed to enact an array of pro-crypto policies in a bid to win votes — and campaign cash — from digital asset enthusiasts in recent months. Now, he’s weaving the overtures into his pitch for his sons’ forthcoming startup.
While the details of Eric Trump and Donald Trump Jr.'s crypto endeavor haven’t yet been announced, it could stand to benefit from a second Trump administration’s approach to support the industry.
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CREW identified more than 3,700 conflicts of interest during Trump’s first term.
But critics said the crypto project differs because it could align his family’s financial interest with policy changes that he would be poised to enact.
“The prior conflicts and illegalities took advantage of preexisting loopholes,” said Norman Eisen, an ethics lawyer who served in the Obama White House and later helped build the first impeachment case against Trump. “Here, Trump appears to be promising to create the loopholes while his family is simultaneously designing a business venture to exploit them.”
With this unique selling point the actual product doesn't need to be very good to compete with the market leader, Uniswap, for its chosen counterparties. As Molly White reported, it wasn't:
CoinDesk has gotten hold of a white paper for this supposed World Liberty Financial, which they note appears to be a clone of Dough Finance, a crypto lending platform that was hacked for around $2 million just a month and a half ago. The hack was not a sophisticated one, and instead exploited sloppiness on behalf of the development team.Of course, many people interested in gullible counterparties noticed all the hype, and they didn't have to wait to hack the actual product launch to get in on the action:
The project hasn’t even launched yet, and it’s off to a bumpy start. First, Donald Trump Jr. had to issue a statement to try to stop people from buying up all the fake tokens purporting to be associated with their murky project. Then, Twitter accounts for Lara and Tiffany Trump were both compromised and used to send tweets announcing a supposed token launch. “This is a scam!!!” tweeted Eric, himself retweeting the tweet from his wife’s account containing the scam token address.Nic Carter tweeted:
The reason for this fiasco was that, as usual, the Trumps hired "only the best people". Sam Kessler, Danny Nelson & Cheyenne Ligon dug into the project's white paper in Inside the Trump Crypto Project Linked to a $2M DeFi Hack and Former Pick-Up Artist:can't secure twitter accounts but i'm sure they'll be able to protect an (already hacked) defi protocol from hacks
— nic carter (@nic__carter) September 4, 2024
The document and other reporting describe a borrowing and lending service strikingly similar to Dough Finance, a recently hacked blockchain app built by four people listed as World Liberty Financial team members. Other participants include all three of Trump's sons (including 18-year-old Barron, who is identified as the project's "DeFi visionary"), financiers and e-commerce influencers.The leader of the Dough Finance team was Chase Herro. When it came time to move on, he obviously found in the Trumps the ignorant and greedy counterparty he needed. Zeke Faux and Muyao Shen also piled on with Behind the Trump Crypto Project Is a Self-Described ‘Dirtbag of the Internet’:
Herro, a fast-talking 39-year-old who shows off his fancy cars and private-jet rides on social media, is an unknown in the crypto world. More than a dozen prominent digital-asset investors said in interviews they had never heard of him. The only crypto project with which he was publicly affiliated attracted only a few million dollars and suffered a devastating hack. A token he promoted on influencer Logan Paul’s podcast dropped 96% afterward. In one speech in 2018, he called himself “the dirtbag of the internet” and said that regulators should “kick s---heads like me out.”
“You can literally sell s--- in a can, wrapped in piss, covered in human skin, for a billion dollars if the story's right, because people will buy it,” Herro said about crypto in a 2018 YouTube video recorded as he drove in a Rolls-Royce. “I'm not going to question the right and wrong of all that.”
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“This is a huge mistake,” said Nic Carter, a Trump supporter who is a founding partner at the crypto-focused venture capital firm Castle Island Ventures. “It looks like Trump’s inner circle is just cashing in on his recent embrace of crypto in a kind of naive way, and frankly it looks like they’re burning a lot of the good will that’s been built with the industry so far.”As with Trump University and Truth Social, the whole point is for "regular folks" to lose money. But, if you're a candidate positioning yourself as pro-crypto in the hope of getting large checks from the cryptosphere, making this obvious to everyone but the cult members is a bad idea.
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“It’s a very typical playbook of smaller operators or more amateur operations in the crypto space to try to generate a lot of hype before revealing the details,” said Austin Campbell, an adjunct professor at NYU’s Stern School of Business who previously led the risk and portfolio management operation at the crypto firm Paxos. “That makes them susceptible to all sorts of nonsense.”
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One crypto industry representative in Washington, granted anonymity because of sensitivities around criticizing Trump, described having “a laundry list of concerns.” A big worry is that that it could reflect poorly on the industry as it pushes for policy changes that would help legitimize the sector.
“Maybe it doesn’t move the needle for most people, but if this thing is hacked or regular folks lose money on it or it opens up the door for the SEC to investigate the team, it only looks like it has downside risk,” Carter said. “It looks to have very little upside risk.”
PS: Wikipedia explains the title of this post here.
Money and Banking says A National Strategy for Bitcoin? Sell it all now!:
ReplyDelete"A recent Wall Street Journal editorial highlighted the stiff competition for the “dumbest economic policy” proposed during the current U.S. Presidential campaign. High on the list are tariffs, food price controls, and opposition to the acquisition of U.S. Steel by a Japanese firm. We suggest adding to this list the recent proposals to establish a national stockpile, or even a strategic reserve, of Bitcoin ... Rather than accumulating Bitcoin, we urge policymakers to quickly sell whatever they have or receive.
We doubt that Bitcoin has positive long-run fundamental value. Given the energy costs of settling transactions and producing Bitcoin, as well as cryptocurrency’s role in facilitating illicit finance, Bitcoin’s social value could be very small or even negative. With this in mind, we argued that, rather than elaborating a regulatory framework that helps legitimize crypto, authorities should simply let it burn (see here and here). Indeed, in the absence of legal protections, Budish concludes that the value of Bitcoin probably would collapse if it were widely used."
Molly White reports on the launch of the Trump's World Liberty Financial:
ReplyDelete"The conversation eventually meandered around to the intended subject, with Trump speaking vaguely about how his children changed his mind on cryptocurrency, which he said “is one of those things we have to do whether we like it or not”. Although Trump departed the stream around forty minutes in without ever touching on the specific World Liberty Financial project, the conversation continued almost another two hours, with a cast of characters including Eric Trump, Donald Trump Jr., and several other key figures in the project."
Notably the cast of characters did not include the project's "DeFi Visionary" as Sean Craig reported in Trump Launches Crypto Business Without ‘Four Wallets’ Barron:
"Trump’s youngest son Barron, 18, was nowhere to be found when it came time for him to speak, some two hours into the meandering promotional for World Liberty Financial, which even Trump’s crypto sector allies reportedly think is a stupid idea."
Molly White points out the fundamental disconnect between the reality of ripping off the faithful and the rhetoric of financial inclusion:
"Despite the length of the conversation, details about World Liberty Financial remained scant, with much of the conversation devoted to general talking points about the potential for crypto to help those who face challenges in getting access to financial services.
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The project seems to be a borrowing and lending project similar to Aave, an Ethereum-based protocol first launched in 2017. Critically, the “loans” on Aave are overcollateralized loans, meaning that a borrower must supply more assets than they’re borrowing — making the project useful to those who hold substantial amounts of crypto and want to borrow against it rather than sell it, but not helpful to most people who face challenges accessing credit in the real world, where people generally take out loans because they don’t have the assets required for whatever it is they’re trying to do."
Shaurya Malwa and Sam Kessler report that Trump-Touted Crypto Website Crashes as Token Sale Goes Live, With Just 1.7% of Target Sold:
ReplyDelete"The token sale website suffered numerous outages shortly after going live, and as of 15:41 UTC, some 344 million tokens had been sold to around 3,000 unique wallets. Still, the amount represented just 1.7% of the 20 billion tokens allocated to the public sale."