Photo by Maxim Hopman
Cryptocurrencies help rich, professional investors and criminals become richer. Anyone who does not fall into one of these two categories can easily lose their money gambling on crypto.
A good case study is the $Trump cryptocurrency coin. According to the New York Times, the Trump family and its business partners have made about $100 million (and counting) in fees from the meme crypto coin. One wealthy investor, who bought about $1 million worth of the coin less than two minutes after it was released, made $109 million after selling the coins within two days. This investor may have had insider information about when the $Trump coin was being released. Many other savvy investors, who knew when to dump the coins, also were able to make millions. On the other hand, over 800,000 other investors collectively lost over $2 billion chasing this latest crypto get-rich-quick scheme.
The story was mostly the same for the $Melania (Trump) meme crypto coin. At the time of this writing, the $Trump coin was down 82 percent from its peak. The $Melania coin was down 94 percent. The way to make the most money on the $Melania coin was to purchase it immediately as it was released and then sell it a day later. Apparently, even some wealthy professional investors weren’t fast enough in purchasing and dumping the coin. One investor lost $14 million betting on $Melania, and another lost about $4 million.
Buying a cryptocurrency and then dumping it a day later, of course, is not investing — it’s gambling — and the winners get to take the losers’ money. But it is not a fair game. Wealthy investors who can hype cryptocurrencies and who can spend the resources needed to know the right time to dump them, can make a big profit off less savvy investors. The crypto game is tilted toward funneling money up toward the richer players.
Criminals Crypto
The Federal Trade Commission reports that cryptocurrency fraud is now one of the leading types of financial crimes. Criminal activity associated with cryptocurrencies is growing rapidly. Chainalysis, a blockchain analytics firm, tallies the value of a wide range of criminal activity involving cryptocurrencies. They include ransomware extortion where payment is required in crypto, people trading illegal drugs and other illegal goods for crypto, the theft of crypto, crypto scams, and other crimes. Chainalysis estimates that in 2020 criminals received $11 billion in cryptocurrencies from illegal activities. Their estimate for 2024 is $51 billion. So far, 2025 looks like it could exceed 2024. In February, $1.5 billion worth in cryptocurrencies was stolen from the Bybit cryptocurrency exchange. This is thelargest theft of cryptocurrency on record.
Chainalysis also notes that the types of criminals using crypto and the types of criminal activity they are engaged in continues to expand. In addition to ransomware and stealing individuals’ crypto, Chainalysis reports that “[a]n array of illicit actors, including transnational organized crime groups, are increasingly leveraging cryptocurrency for traditional crime types, such as drug trafficking, gambling, intellectual property theft, money laundering, human and wildlife trafficking, and violent crime.” It is also more common to find hate groups, including white supremacist and neo-Nazi groups, using cryptocurrencies to fund their activities.
Although cryptocurrencies have a growing presence in the financial exploitation and victimization of the public, the Trump administration is weakening consumer protections. Elon Musk has gravely weakened the Consumer Financial Protection Bureau which used to process thousands of cryptocurrency complaints a year. Musk is also weakening the Federal Trade Commission which also responds to crypto complaints.
There are clear conflicts of interest between the Trump administration and the regulation of the crypto industry. Elon Musk was one of the wealthy investors who hyped the DOGE cryptocurrency inflating its value. Musk has owned DOGE and other cryptocurrencies. His Department of Government Efficiency also known as DOGE is clearly a nod to this crypto.
Donald Trump received tens of millions of dollars for his 2024 presidential campaign from the crypto industry, and he and his family profits financially from the industry. Given these facts, it is perhaps not surprising that the Trump administration would not only restrict the policing of the crypto industry, but enact policies like creating a “Strategic Bitcoin Reserve” that would bolster the industry and his and his family’s profits.
This first appeared on CEPR.
