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Senator Asks SEC to Investigate Trump Family Crypto Company

"The SEC must be willing to enforce the law even when potential wrongdoers include those with powerful political connections. As Congress considers crypto market structure legislation, it is critical that it both protects investors and shuts down the President and his family from profiting off of cryptocurrency while in office."
Elizabeth Warren, Senate Banking Committee Ranking Member
"The SEC must be willing to enforce the law even when potential wrongdoers include those with powerful political connections. As Congress considers crypto market structure legislation, it is critical that it both protects investors and shuts down the President and his family from profiting off of cryptocurrency while in office."
Elizabeth Warren, Senate Banking Committee Ranking Member

Senator Elizabeth Warren asked the SEC to investigate whether World Liberty Financial, Inc. ("WLF") misled investors or violated securities laws in connection with a $75 million loan the company took using its own tokens as collateral.

In the letter, the Senator stated that WLF borrowed $75 million using roughly $440 million of its own WLFI tokens as collateral, in a transaction conducted through a decentralized lending protocol co-founded by a WLF advisor and chief technology officer. The Senator said the WLFI tokens raised about $715 million from token sales. WLFI token's price fell after the loan was reported. The Senator claimed that days after the loan, WLF announced a proposed schedule, subject to investor approval, under which holders could begin selling their tokens only after a multi-year lock-up. She claimed the arrangement allowed WLF to monetize its holdings while other token purchasers could not, and that an entity affiliated with the Trump family is entitled under WLF disclosures to 75 percent of WLFI token sale proceeds after agreed reserves and expenses.

Ms. Warren's asked (i) whether the SEC evaluated if the WLFI token is a security subject to the securities laws, notwithstanding a disclaimer in WLF's Form D filing; (ii) whether the SEC investigated if WLF made material misrepresentations to investors about the loan, the token-release schedule, or the transaction's circular structure; (iii) whether the SEC examined what investors were told and whether any inducements to purchase were materially false; (iv) whether the SEC examined the totality of the circumstances and investors' reasonable expectations; and (v) whether the SEC contacted WLF investors.

 

Primary Sources

  1. Letter

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Individuals
Elizabeth A. Warren
Regulated Activities
Disclosures Jurisdiction
Sub-Activity
Jurisdiction by Product or Activity
Regulated Products
Digital Assets
Body of Law
Securities Law
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US - Federal
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US Congress