Democratic Senators Elizabeth Warren and Richard Blumenthal are pressing the U.S. SEC to probe the Official Trump [TRUMP] memecoin.
In a letter to the Wall Street watchdog on the 3rd of August, the Senators said President Donald Trump made $636 million in profits from the memecoin alongside early buyers.
But over a million investors lost over $3.81 billion on the coin after it crashed by 98%. This mirrored rug pull patterns, according to the lawmakers.
We are concerned that President Trump’s memecoin scheme may constitute an illegal scam, such as a ‘rug pull’.This pattern tracks investor concerns that, once $TRUMP was launched, the coin became ‘an abandoned project’.
In “pump-and-dump” schemes or rug pulls, late buyers are the ones always left catching knives and hefty losses.
The lawmakers urged the SEC to investigate whether a “fraudulent scheme” was underway to prevent further extraction from Trump memecoin holders.
While the issues raised are apt, the timing is questionable. This ties back to an ethics issue, which the Democrats insist must be addressed for the CLARITY Act to progress.
What TRUMP crypto memecoin means for CLARITY Act
Besides the ethics provisions deal, Senate Democrats are also calling for improved language for illicit finance and stablecoin yield provisions before they back the bill.
Notably, some Republicans have also withheld their support for the CLARITY Act. As such, the bill may need over ten Democrats for it to sail through and hit the 60-vote threshold. Whether the Democrats’ demands on ethics and other issues will be met before the end of the week remains unclear.
But the Senate is expected to go on recess on the 6th of August. Even if they resume in September, they’ll likely be concerned with the upcoming November elections to build consensus over the bill.
Separately, the Wall Street Journal (WSJ) Editorial Board has warned that the bill needs changes to “reduce risk to the financial system.” Most crypto investors, such as Anthony Scaramucci, viewed WSJ’s move as a “last-minute effort to stall things” by the banking lobby.
Overall, any failed progress for the bill this week may stall until after the elections. Bernstein is hopeful that the SEC and CFTC will increase rulemaking if the bill fails.
However, analyst Zack Guzman warned of the ‘Gary Gensler trap.’ He noted that the rulemakings could be undone by the next administration if Democrats gain control of Congress.
Final Summary
- Sen. Warren pushes for SEC probe of Trump memecoin after $3.8B investor loss
- This is part of a broader push by Democrats to have strong ethics provisions in the CLARITY Act
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