When the Melania token launched in January, Donald Trump’s supporters and speculative crypto investors were quick to hop on board, quickly taking the memecoin to an all-time high of $13.73 and a market cap over $2 billion. Today, the token trades for less than a dime and its market cap is about $84.8 million. A lawsuit alleges the backers of that coin launched it as part of a fraud campaign meant to enrich only themselves.
The accusation was made Tuesday in an amended complaint to a class action suit against Benjamin Chow, co-founder of Meteora (a crypto exchange), and Hayden Davis, Gideon Davis, and Charles Thomas Davis of venture capital firm Kelsier Labs, in the U.S. District Court in the Southern District of New York. The defendants are accused of running a massive pump and dump scheme with at least 15 crypto coins, including $MELANIA.
The suit alleges Melania Trump was used as “window dressing for a crime engineered by Meteora and Kelsier.”
“Neither Melania Trump nor her representatives knew the project was part of a systemic fraud, and they would not have agreed to any use of her name had they known the truth,” the suit reads.
Neither the White House, Meteora, nor Kelsier Labs responded immediately to requests for comment about the lawsuit. We will update the article if they respond.
Here’s what to know.
What is the lawsuit alleging?
The court filing alleges executives at Meteora and Kelsier, through a network of crypto wallets, held roughly one-third of the entire $MELANIA supply before the memecoin began trading publicly. They then allegedly began actively promoting it with paid promotions, influencer posts, and other events. The “official” label on the token further stoked public interest, the suit says.
“In truth, the insiders had already cornered the market before a single public buyer could act,” the suit reads. “The use of the Melania name completed the illusion. The branding suggested oversight and endorsement by a prominent public figure, neutralizing investor skepticism. In this way, the enterprise weaponized fame to disarm diligence.”
Within hours, the $MELANIA token boasted a market cap of tens of millions of dollars. The suit alleges the defendants sold off tokens as the price rose, making millions of dollars in profit within hours.
The defendants are accused of running a similar play with several other tokens. “$MELANIA’s story, though cloaked in celebrity glamour, was just another chapter in a single, unbroken enterprise designed to extract value under the pretense of innovation and credibility,” the filing reads.
Are these criminal charges?
No. The suit is a civil class action suit brought on behalf of investors. To date, there have been no criminal charges brought against any of the defendants. There has also been no action filed against them by the Securities and Exchange Commission or Justice Department, both of which remain closed due to the ongoing government shutdown.
Is the Melania Trump memecoin still being traded?
Technically, it is. But because the token has lost 99 percent of its value, there aren’t a lot of investors paying much attention to it these days.
Is Melania Trump being sued?
No. Although celebrities such as Linday Lohan or Jake Paul have been sued for promoting cryptocurrencies (for not disclosing they were being paid to do so), the filing is very direct in clearing up any questions about the first lady’s possible involvement in an alleged rug pull. “Melania Trump’s team, to the extent it granted any permission, did so without knowledge of the fraud, the insider rigging, or the deceptive launch mechanics,” reads the suit. “Had they been aware that the project was part of a coordinated criminal scheme, they would have rescinded any consent immediately.”
Trump’s involvement is different than that of celebrities such as Linday Lohan or Jake Paul, who were sued for promoting cryptocurrencies without disclosing they were being paid to do so.
The Trump family, however, has been criticized for its deep involvement in the crypto world, which some have called a conflict of interest, given Donald Trump’s influence. The Trump family is estimated to have made more than $1 billion from crypto ventures since Trump took office in January.
Will Melania Trump memecoin investors receive some sort of compensation?
That remains to be seen. The case seeks an order compelling the defendants to hand over all of the money gained through the launch of the $MELANIA and other tokens along with compensatory and statutory damages. If the defendants settle or are found liable, though, it’s unknown much that will amount to—or what will be left for investors after legal fees.
Chris Morris
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