The LIBRA token experienced a catastrophic crash on February 14, 2025, in what increasingly appears to be a well-orchestrated pump-and-dump scheme. The incident not only resulted in massive financial losses for retail investors but also dragged Argentine President Javier Milei into a political and legal crisis. The scandal highlights the vulnerabilities within the cryptocurrencyA cryptocurrency is a digital or virtual form of currency that uses cryptography for security. Unlike traditional currencies issued by central banks, cryptocurrencies operate on de… market, particularly in meme coins, and has prompted renewed calls for regulatory intervention.
A Classic Pump-and-Dump Scheme
The rapid rise and fall of LIBRA exhibit all the characteristics of a sophisticated pump-and-dump operation. The token’s market capitalization surged to $4.5 billion shortly after launch, only to plummet by 94% within hours. This dramatic collapse suggests that early investors and insiders exploited the hype, leaving retail traders with severe losses.
On-chain analysis revealed that a small group of insiders controlled 82% of the tokens. Within just three hours of the token’s launch, fewer than ten insider wallets collectively cashed out $87.4 million. This level of concentration and early liquidation indicates a premeditated strategy to profit before the broader market realized the token’s inherent risks.
Liquidity manipulation further exacerbated investor losses. Large holders reportedly leveraged liquidity pools on the decentralized exchange Meteora, using financial mechanisms to maximize their gains while draining value from the token. This form of market manipulation underscores the risks associated with low-regulation crypto ecosystems, where significant players can distort prices to their advantage.
Investigations uncovered direct ties between LIBRA’s market makerMaker (MKR) is an altcoin and governance token of the MakerDAO ecosystem, a decentralized finance (DeFi) platform built on Ethereum. MakerDAO facilitates the issuance and managemen… and creator and Arunkumar Sugadevan, an Indian developer associated with multiple fraudulent projects, including MELANIA, ENRON, and OG FUN.
A wallet linked to MELANIA’s creator profited $2.4 million by sniping the token early, while another address connected to LIBRA’s launch cashed out $87 million. The same wallet later sniped LIBRA again, securing an additional $6 million in profits.
Javier Milei’s Role and Political Ramifications
Argentine President Javier Milei’s involvement in the LIBRA scandal has added a political dimension to the financial turmoil. Initially, Milei publicly endorsed LIBRA through a social media post, which significantly boosted the token’s credibility and likely encouraged a broader investor base to buy in. His association with the project contributed to the token’s rapid ascent in market value.
However, following the token’s collapse, Milei quickly distanced himself from the project. He deleted his promotional post and released a statement denying any prior knowledge of the token’s inner workings. Despite his efforts to sever ties, his involvement has triggered a political crisis in Argentina. Opposition lawmakers have called for his impeachment, citing the potential misuse of his position to influence financial markets.
Adding to his legal troubles, Milei now faces fraud charges related to LIBRA. A legal petition accuses him of orchestrating a “rug pull” and violating Argentina’s Public Ethics Law. If proven, these allegations could have significant consequences not only for Milei’s presidency but also for the broader perception of political figures engaging in cryptocurrencyA cryptocurrency is a digital or virtual form of currency that uses cryptography for security. Unlike traditional currencies issued by central banks, cryptocurrencies operate on de… promotions.
Market Consequences and Regulatory Implications
The LIBRA collapse has had far-reaching consequences beyond the immediate financial losses. The scandal has intensified an already worsening liquidity crunch in the altcoin market. Investors have grown more skeptical of meme coins, particularly those on the SolanaSolana is a blockchain platform designed to host decentralized, scalable applications. Here are some key aspects of Solana in the context of altcoins: Key Features: Scalability: … blockchainA blockchain is a decentralized, distributed ledger technology (DLT) that records transactions in a secure, transparent, and tamper-proof manner. Each transaction is grouped into a…, which was heavily associated with LIBRA. As a result, trading volumes have declined, and investors are retreating from speculative assets in favor of tokens with greater utility and transparency.
Regulators are also taking notice. The LIBRA scandal has reignited discussions around tighter controls over cryptocurrencyA cryptocurrency is a digital or virtual form of currency that uses cryptography for security. Unlike traditional currencies issued by central banks, cryptocurrencies operate on de… markets. Lawmakers and financial oversight bodies are pushing for enhanced transparency measures, stricter listing requirements, and penalties for market manipulation. If these measures are implemented, they could reshape the way new tokens are launched and traded, particularly in high-risk segments like meme coins.
Why Investors Should Pay Attention
The LIBRA incident serves as a cautionary tale for investors navigating the cryptocurrencyA cryptocurrency is a digital or virtual form of currency that uses cryptography for security. Unlike traditional currencies issued by central banks, cryptocurrencies operate on de… space. The involvement of high-profile figures like Milei demonstrates how political endorsements can artificially inflate asset values before an inevitable crash. Investors following meme coins and speculative assets should be wary of projects with concentrated token ownership and vague fundamentals.
Furthermore, regulatory actions stemming from this case could influence the broader cryptocurrencyA cryptocurrency is a digital or virtual form of currency that uses cryptography for security. Unlike traditional currencies issued by central banks, cryptocurrencies operate on de… landscape. Stricter oversight might limit the ability of opportunistic insiders to engage in pump-and-dump schemes, but it could also create compliance challenges for legitimate projects. Investors should monitor developments in regulatory policies, as they will likely impact the future viability of various crypto investments.
The LIBRA token collapse is a stark reminder of the risks associated with unregulated financial markets. The scandal has not only shaken investor confidence but also exposed potential abuses of power at the intersection of politics and cryptocurrencyA cryptocurrency is a digital or virtual form of currency that uses cryptography for security. Unlike traditional currencies issued by central banks, cryptocurrencies operate on de…. As legal proceedings against Milei unfold and regulatory scrutiny intensifies, the repercussions of this event will likely shape the future of crypto investments for years to come.
Lance Jepsen is the senior personal finance writer for Guerilla Stock Trading who has spent more than 25 years covering the stock market and economics. In addition, Lance has worked as a private stock analyst for a number of high worth individuals.
