Argentina federal judge to probe Milei crypto scandal, stock index falls

An Argentine judge was assigned on Monday to investigate President Javier Milei's role in promoting a cryptocurrency that crashed, the latest shockwave from a scandal that has threatened to slow the libertarian leader's momentum.

Milei late on Friday recommended the little-known crypto coin $LIBRA in a posting on X, kicking off a brief rally. He later deleted the posting and denied having any link to the cryptocurrency, which soon plunged.

The country's fintech chamber said the case could amount to a "rug pull," a scam in which a coin's backers lure multiple investors, sending the cryptocurrency's value soaring, then quickly withdraw their funds, leaving investors with worthless tokens.

Opposition lawmakers have said that Milei, whose tough austerity program has won plaudits from investors and made progress in taming rampant inflation, could face an impeachment trial over his actions.

Argentina's benchmark S&P Merval stock index tumbled 5.6%.

The investigation was assigned on a random basis to veteran Federal Judge Maria Servini after local media reported that more than 100 complaints were presented to Argentina's judiciary and several even to US courts.

"Milei's government is suffering the biggest reputational crisis of its government," consultancy Wise Capital said, noting that the token was now being labeled as a hoax.

Observatorio del Derecho a la Ciudad, a local NGO, filed a lawsuit accusing Milei and other government officials of illicit association, fraud and breach of their duties as public officials.

"We denounce Milei as being part of an illicit association that organized a scam with the $LIBRA cryptocurrency that simultaneously affected more than 40,000 people with a loss of more than $4 billion," it said on its website.

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A government source said Milei himself was the fraud's biggest victim.

"The only one on the face of this earth who was cheated is Milei," the source said, speaking on conditions of anonymity. "Javier promotes private projects all the time and will continue to do so."

Milei's government has championed market deregulation and taking a chainsaw to red tape.

The token was launched on a crypto exchange called Meteora, the same platform that launched the $Trump meme coin in January, a cryptocurrency that saw a rapid surge and slump in which an estimated 200,000 crypto wallets lost money.

Meteora co-founder Ben Chow denied in a post on X on Saturday that his team had any role in launching $LIBRA, adding that the firm "never had any access to the tokens or to Milei."

Chow added in a later post on Monday that the firm "had no involvement in the project at all beyond providing IT support, including commenting on the liquidity curve and helping verify the token's authenticity after the token was publicly launched."

Analysts said the opposition is unlikely to garner the votes to push through an impeachment proceeding. An ongoing probe of Milei's involvement could sap his government's momentum heading into midterm elections this year, handing the opposition a lifeline.

Some investors reacted on social media over the weekend in anger, saying they had been scammed out of their savings by the president of Argentina, while Milei's supporters defended him as the victim of politically motivated attacks.

Milei himself came out swinging, accusing his enemies in another X post on Friday of trying to take advantage of the situation.

"This increases our conviction to kick them in the ass," he added.