LIBRA Token Crash Leads to $107M Insider Withdrawal, 94% Value Loss

A class-action lawsuit has been filed in the Supreme Court of New York against the creators of the LIBRA memecoin, naming Kelsier Ventures, KIP Protocol, and Meteora as defendants. The lawsuit alleges that the defendants orchestrated a deceptive and manipulative token launch, resulting in significant losses for investors. The LIBRA token initially gained attention when it was promoted by Argentine President Javier Milei on social media, positioning it as an economic initiative to boost private-sector funding in Argentina.

The lawsuit claims that the developers used a "predatory" one-sided liquidity pool to artificially inflate LIBRA’s price, allowing insiders to profit while regular investors suffered losses. Within hours of the launch, insiders allegedly withdrew about $107 million from the liquidity pools, causing a dramatic 94% crash in LIBRA’s market value. The lawsuit further states that approximately 85% of LIBRA’s tokens were held back at launch, a fact that was not disclosed to investors.

Burwick Law, the firm representing the investors, alleges that the defendants took advantage of President Milei’s influence to promote the token, creating a false sense of legitimacy that misled investors about the coin’s economic potential. The law firm is seeking multiple forms of relief for affected investors, including compensatory and punitive damages, as well as the return of "unjustly obtained" profits.

Blockchain research firm Nansen examined the aftermath of the LIBRA crash, revealing that out of 15,430 large LIBRA wallets, more than 86% sold at a loss, totaling $251 million. Only 2,101 wallets were able to make a profit, taking home a combined $180 million. Kelsier Ventures and its CEO, Hayden Davis, were among the biggest winners from the token launch, reportedly making around $100 million from the scheme. Davis now faces potential legal trouble beyond the class-action lawsuit, as an Argentine lawyer has requested an Interpol red notice for his arrest.

Despite the controversy, Davis claimed on February 17 that he didn’t directly own the tokens and wouldn’t sell them. President Milei has tried to distance himself from the scandal, arguing that he didn’t “promote” the LIBRA token but merely “spread the word” about it. This distinction hasn’t satisfied his critics, and the political fallout in Argentina has been severe, with the opposition party calling for Milei’s impeachment, though these efforts have not gained much traction so far.

The LIBRA token launched on the Solana blockchain on February 14 and quickly reached a market cap of $4.4 billion before crashing. The incident has been dubbed “Cryptogate” by some in the industry. The New York Court's review of the LIBRA token case following the 94% price crash highlights the ongoing legal and regulatory scrutiny surrounding the cryptocurrency market. The case underscores the risks associated with memecoins and the importance of transparency and fairness in token launches. As the legal proceedings unfold, investors and industry observers will be closely watching the outcome, which could set a precedent for future cryptocurrency-related lawsuits.