How Trump’s business deal with a cryptocurrency company reveals a potential conflict of interest

WASHINGTON (AP) — Crypto.com was under siege.

For more than a year, the company has been under investigation by the Democratic administration of President Joe Biden, as part of an aggressive push to regulate the largely unregulated cryptocurrency industry. Financial regulators have told the company that enforcement action is likely.

Then Donald Trump won the 2024 election, and the company’s legal risks dissipated.

Crypto.com boosted spending on a lobbyist close to Trump and donated $11 million to political committees linked to the Republican president, records show. Within months, the investigation was dropped. By August, Crypto.com announced that it would invest nearly $1 billion in assets in a project with a new partner – Trump’s social media company.

Legal and ethics experts say Crypto.com’s journey from investigative target to Trump business partner provides a case study of the conflicts of interest that have arisen in Trump’s second presidency. Unlike any of his modern-day predecessors, Trump has allowed his family companies to enter into lucrative arrangements with federally regulated companies, some of which have benefited from actions taken by his administration.

In this case, the deal with Crypto.com favored the president’s social media company, which has lost hundreds of millions of dollars since its launch in 2021. The Trump Media and Technology Group put up little money but took a large ownership stake in the new treasury of Crypto.com’s Cronos token.

Presidents have historically gone to great lengths “to avoid even the appearance that they are using their office for personal gain,” said Kedrick Payne, who was previously a senior counsel for the Office of Congressional Ethics.

“This appears to be another example of pay-to-play management,” said Payne, who leads the ethics program at the nonpartisan Campaign Legal Center in Washington. “There is clearly a perception that in order to obtain favorable policies and procedures from management, a company needs to provide a financial benefit to the president.”

In a statement, Crypto.com spokeswoman Victoria Davis did not address the concerns raised by legal and ethics experts.

“Crypto.com looks forward to partnering with professional crypto companies and sharing our vision for its future,” said Davis, who described Trump Media as a “digital media leader.”

Trump Media did not respond to specific questions about the arrangement. In a brief statement, Shannon Devine, a spokeswoman for the company, called this story “obviously brought to the Associated Press by political operatives.”

The White House has repeatedly said that Trump took appropriate steps to avoid conflicts of interest, pointing to his decision shortly after the presidential election to place his business holdings in a trust controlled by his children.

“Neither the President nor his family have ever been, or will ever be, involved in a conflict of interest,” White House press secretary Carolyn Leavitt said in a statement.

Trump Media is getting into the cryptocurrency space

The Trump Media and Technology Group, which is majority owned by Trump, was not founded with cryptocurrencies in mind. The groundbreaking Truth Social platform launched in early 2022, giving the then-former president a megaphone after Twitter and Facebook banned him for his role in inciting the January 6, 2021 attack by a mob of his supporters on the US Capitol. Trump was reinstated on both platforms.

Truth Social faced hurdles getting started. A shell company — a SPAC in financial jargon — that raised money for the venture was investigated by the Securities and Exchange Commission for misleading investors, culminating in a multimillion-dollar fine. A SPAC board member was sentenced to prison for insider trading.

When it went public in 2024, Trump Media had to fend off lawsuits brought by two co-founders who accused the company of defrauding them out of stock.

Trump Media is not yet profitable. Just last year, it lost more than $400 million. Its stock price closed Monday at about $10.50 per share, down from a high of about $62 when it began trading in March of last year. Over the past year, company executives have branched out into new business lines, including a live streaming platform, financial services and cryptocurrencies.

He watches: Trump family’s cryptocurrency ties raise concerns as administration eases regulations

The move into cryptocurrencies was a reflection of the complete evolution in Trump’s thinking about cryptocurrencies. Shortly after leaving office in 2021, he said that Bitcoin, a leading cryptocurrency, “looks like a scam.” Three years later, during his presidential campaign, he had a very different view. His family launched their own cryptocurrency company, World Liberty Financial, began selling tokens and pledged to roll back regulation of the industry.

Among those who had business entanglements: Changping Zhao, the billionaire founder of the Binance platform, who was pardoned by Trump several months after his participation in a complex deal with a sovereign wealth fund of the United Arab Emirates. As part of this arrangement, $2 billion was invested in World Liberty Financial to purchase its new digital stablecoin.

In a statement, Binance said it was “grossly false and misleading” to characterize the company’s trading affiliations with World Liberty Financial as a “conflict of interest.” The company added that the decision to use the World Liberty stablecoin to complete the transaction was made by the UAE’s sovereign wealth fund.

The SEC also halted its investigation into Justin Sun after the cryptocurrency mogul said he bought nearly $200 million in Trump’s cryptocurrency offerings.

Sun did not respond to requests for comment submitted through his company.

SEC investigation

Crypto.com spent most of 2023 and 2024 fighting potential regulatory actions by the Biden administration. After Trump defeated Biden, the cryptocurrency company began distributing donations to the president-elect’s political committees.

Crypto.com donated $1 million to Trump’s inauguration last December, followed by a $10 million contribution in February to MAGA Inc, the president’s super political action committee. In late 2024, Crypto.com began ramping up its lobbying spending for Jeff Miller, a global Trump fixer and GOP fundraiser who served as chief financial officer for the incoming president’s inauguration festivities.

Miller, who did not respond to a request for comment, lobbied the White House and the Securities and Exchange Commission on regulatory matters, according to disclosure reports. The investigation was officially dismissed on 27 March.

A Crypto.com spokeswoman said Miller “was not involved” in the SEC investigation. The company declined to comment on the nature or seriousness of the charges that the Securities and Exchange Commission intends to bring against it.

Agency commissioners during the Biden presidency authorized charges against Crypto.com. But the company’s lawyers have negotiated with the SEC to delay filing any enforcement action until after Trump takes office. In return, Crypto.com withdrew its countersuit against the SEC. Such negotiations are common before the SEC brings an enforcement case.

“Ultimately, the investigation was closed because there was no legitimate case to pursue,” Davis’ spokeswoman said. “There is absolutely no connection between this decision and the political activities of Crypto.com.”

“Any assertion to the contrary is completely inaccurate,” she added.

Days before Crypto.com revealed it had dropped the SEC investigation, Trump Media was making news of its own.

Search for new partners

When it launched a series of investment funds in March with a “Made in America” focus, Trump Media announced that Crypto.com had been chosen as the digital host for the funds.

However, Trump Media has been eyeing more deals, and the early foray between the two companies has offered a glimpse of what’s to come.

In April, officials at the social media company indicated they were looking for a telecommunications, media or technology company to acquire. They teamed up with a financial services company and launched a SPAC to raise money for the project.

Four months later, Trump Media and Crypto.com announced the formation of Trump Media Group’s CRO strategy. They said the new company will serve as a custodian for Crypto.com’s Cronos token, though company officials did not reveal many details.

Under the terms of the deal, which has not yet been finalized, Crypto.com will commit to contributing the lion’s share of capital, shaving $1 billion worth of its Cronos token into the project. Yorkville Advisors, a financial services firm that has worked closely with Trump Media, is offering a line of credit. Trump Media’s contribution is more limited and includes “a license to use certain intellectual property,” according to an SEC filing.

The three companies will have “majority ownership” in the new venture, according to a company press release. But the size of the stake that Trump Media will own has not yet been revealed.

“When you think about dropping the investigation into (Crypto.com), the economics of this look more like a plea deal than a trade deal,” said Corey Fryer, a cryptocurrency policy expert who was a senior SEC official during the Biden presidency.

Hilary Allen, a law professor at American University who specializes in banking and cryptocurrencies, said the deal is troubling from an ethical perspective.

As for Crypto.com, “an investigation and investment (in a Trump-affiliated company) was dropped after the fact,” Allen said. “People can draw their own conclusions.”

Devin Nunes, chairman and CEO of Trump Media, told a conservative commentator in August that the new company offered consumers “two names” — Trump Media and Crypto.com — “that you can trust.”

“This is really going to become the future of finance,” said Nunes, a former Republican congressman and close Trump ally.

Crypto.com appears to be keen on cementing other deals with Trump Media. The cryptocurrency exchange announced in October that it had created an online marketplace that will allow Truth Social users to bet on a range of global events.

Among those that users will be able to bet on: the outcome of the elections.