Senators Elizabeth Warren and Richard Blumenthal are asking the SEC to investigate the Official Trump (TRUMP) memecoin after it crashed 98%, wiping out more than $3.81 billion from over a million investors. The senators are tying the probe to ethics demands they want met before backing the CLARITY Act.
Democratic Senators Elizabeth Warren and Richard Blumenthal are asking the U.S. Securities and Exchange Commission to investigate the Official Trump (TRUMP) memecoin. In a letter sent to the SEC on Aug. 3, the senators said President Donald Trump made $636 million in profits from the token alongside early buyers.
But over a million investors lost more than $3.81 billion after the coin crashed 98%, a pattern the senators said mirrors a rug pull. According to the senators' letter: "may constitute an illegal scam, such as a 'rug pull'".
In pump-and-dump schemes or rug pulls, late buyers are typically the ones left holding the losses. The senators urged the SEC to determine whether a fraudulent scheme was underway to prevent further losses for TRUMP memecoin holders.
Probe tied to CLARITY Act ethics fight
However, the timing is complicated: Democrats have linked ethics provisions on the memecoin to their support for the CLARITY Act. Senate Democrats are also seeking stronger language on illicit finance and stablecoin yield provisions before backing the bill.
Some Republicans have also withheld support for the CLARITY Act, so the bill may need more than 10 Democratic votes to clear the 60-vote threshold. Whether Democrats' demands are met before the end of the week remains unclear.
The Senate is expected to go into recess on Aug. 6, and even if lawmakers return in September, they will likely be focused on the November elections as they try to build consensus on the bill. Separately, the Wall Street Journal editorial board said the bill needs changes to reduce risk to the financial system. Most crypto investors, such as Anthony Scaramucci, called WSJ's move a last-minute effort to stall things by the banking lobby.
Any failed progress this week could push the bill past the elections. Bernstein said it is hopeful the SEC and CFTC will increase rulemaking if the bill fails. Analyst Zack Guzman warned of a Gary Gensler trap, noting the rulemaking could be undone by the next administration if Democrats gain control of Congress.
Source: AMBCrypto
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