BUENOS AIRES, Argentina (AP) — Argentine President Javier Milei is facing a corruption probe into his promotion of a meme coin, which is a highly speculative form of cryptocurrency that’s surged in popularity after President Donald Trump and his wife launched tokens of their own.

The budding scandal in Argentina has been dubbed locally as “cryptogate” and has links to a diverse cast of characters, including a high-profile U.S. influencer, a crypto developer who uses the pseudonym “Meow,” and a 28-year-old American entrepreneur who said he helped launch first lady Melania Trump’s meme coin last month.

Here’s an explainer on what happened and where things stand:

First off, what exactly is a meme coin?

Meme coins are a type of cryptocurrency that are generally just goofs on internet memes, viral moments or celebrities that aren’t trying to make use of a new technology or solve any new problems. They often have silly names, like Dogecoin, or Fartcoin.

Critics – including many cryptocurrency enthusiasts — say they are nothing more than digital Ponzi schemes that exist to enrich insiders at the expense of retail investors. Those more supportive say meme coins shouldn’t be so easily dismissed and could be early indicators of ways in which the internet could revolutionize financial and other transactions.

“New technologies often look like a toy but evolve into something much more powerful over time,” Coinbase CEO Brian Armstrong said in a recent social media post.

So, what happened with the meme coin associated with Milei?

In short, a disaster.

Milei, the tech-loving, chainsaw-wielding, libertarian president of Argentina, posted on X about the meme coin $LIBRA on Friday, just after it had launched, stating he was “encouraging economic growth by funding small businesses and startups.” 

The coin’s price soared almost immediately, pushing the market value for the project beyond $4 billion.

A few hours after launch, early holders of the coin started cashing out of the project and its price collapsed.

The trajectory of $LIBRA’s price had the hallmarks of a “rug pull,” a not uncommon phenomenon with meme coins. Rug pulls occur when insiders dump their holdings in newly launched meme coins that are soaring in value, which tanks the price and causes losses to newer investors.

Milei deleted his initial post after the price collapsed and distanced himself from the project. By Monday, dozens of criminal complaints had been filed, a judge in Argentina had been selected to investigate allegations of fraud and Argentina’s main opposition party called for his impeachment.

On Friday, a federal prosecutor formally opened the probe to determine the involvement of Milei and five others in the creation and promotion of $LIBRA, for the possible crimes of bribery, fraud, influence peddling and abuse of authority.

A defiant Milei insisted he had acted in good faith and said that he had asked the Justice Ministry’s Anti-Corruption Office to investigate if he or anyone else had committed wrongdoing.

Who is a key player in this?

Hayden Davis, a 28-year-old American crypto developer who said he’s an adviser to Milei and helped launch $LIBRA, has emerged as a central figure. Milei’s office said the government has no connection to Davis.

In an interview with independent crypto journalist Stephen Findeisen, Davis said that meme coins are essentially a rigged game that benefit a small group of people at the expense of retail investors.

“It is an insiders’ game. This is an unregulated casino,” Davis said.

Davis said the $LIBRA coin was not a rug pull but was supposed to be an experiment to show the power and utility of digital currency that’s consistent with Milei’s desire for Argentina to be a hub for innovation.

Davis also said he was involved in the launch of Melania Trump’s meme coin. Launched just before her husband took office, that meme coin’s price underwent a similar trajectory as $LIBRA — quickly soaring upon launch and then dropping. The first lady’s office declined to comment.

Who else was involved?

Online influencer Dave Portnoy, who founded the Barstool Sports podcast empire and is a vocal gambling enthusiast, said on social media that Davis had told him about $LIBRA’s launch before it went public and asked him to promote it.

Portnoy said there were also discussions about the possibility of him interviewing Milei, much like he’d done with President Donald Trump during his first term. Portnoy said he did not buy any $LIBRA until after Milei’s post on X and lost money on the purchase when the price crashed. Davis said he reimbursed Portnoy’s losses.

“Meow” is the anonymous co-founder of a crypto firm involved in launching meme coins, including $LIBRA, said on social media that they were confident that no one at the firms had been involved in insider trading or financial wrongdoing. Still, Meow said the company had hired a law firm to conduct an independent investigation and that one of the company’s leaders had resigned for showing “a lack of judgement.”

What’s next for Milei?

Cryptogate represents the first big scandal of Milei’s presidency. Analysts said it risks eroding public confidence in Milei, who rose to prominence as an iconoclastic economist vowing to tame Argentina’s sky-high inflation and eliminate corruption among the political elite.

Questions remain over how this will affect the Milei administration’s perception among foreign investors at a crucial time in which the government is hoping to ease strict currency controls and negotiate a loan with the International Monetary Fund. He is now in Washington meeting with Tesla chief Elon Musk and other high-profile tech leaders in a bid to generate hype for his economic overhaul.

What about meme coins?

Meme coins don’t appear to be going away anytime soon, but their track record should serve as a cautionary tale for investors and creators alike.

The meme coins promoted by Trump and his wife have seen their prices fall dramatically since the days after their launch and drawn criticism from some Democrats and crypto enthusiasts.

Hailey Welch, better known as Hawk Tuah Girl, saw her popularity plummet after her meme coin collapsed amid allegations of a rug pull. And celebrity Caitlyn Jenner is the defendant in an ongoing class action lawsuit filed by investors who said they were duped into losing money on the $JENNER meme coin. Welch and Jenner have both denied wrongdoing.

The impoverished Central African Republic issued a meme coin earlier this month. After a brief spike, its price has also collapsed.

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Suderman reported from Richmond, Virginia.