Trump-linked ABTC soars then tanks; Justin Sun v WLF drama

Stop us if you’ve heard this one, but the Trump family’s latest crypto venture is making them lots of money and possibly costing everybody else.

On September 3, American Bitcoin Corp (ABTC) (NASDAQ: ABTC) made its publicly traded debut on the Nasdaq exchange. The co-venture of block reward mining outfit Hut 8 (NASDAQ: HUT) and an entity linked to President Trump’s sons, Don Jr. and Eric, charged out of the starting gate Wednesday morning and quickly went on a stock market rollercoaster ride for the ages.

From a starting price of $6.90, the stock soared briefly to over $14 before crashing back below $9, then back up above $10, dipping down to $7 before closing Wednesday at $8.04. The volatility was so great that the Nasdaq’s ‘Limit-Up-Limit-Down’ mechanisms kicked in to halt trading five times on its opening day.

More ominously, the shares endured a significant slide in early trading Thursday and never really recovered, falling by one-fifth to close at $6.41, half-a-buck below its opening day starting price.

The partnership between Hut 8 and the Trumps saw the former contribute 100% of its Bitcoin mining rigs in exchange for an 80% stake in ABTC. A Trump-linked entity got the other 20%, for which the Trumps contributed, er, something. ABTC did a stock-for-stock reverse merger with Nasdaq-listed Gryphon Digital Mining, which rebranded as ABTC ahead of the ticker’s debut.

Both parties seemed pleased with the deal, and with the stock’s opening day performance. At one point, ABTC’s market cap soared to over $7 billion, putting the Trump entity’s share at over $1 billion.

Don Jr. offered his reliably OTT take on the day’s events, tweeting a thread thanking his brother, Hut 8 CEO Asher Genoot and the ABTC team for “restoring transparency, accountability, and trust to the American financial system.” Don Jr. added that ABTC “is on a mission to build the largest Bitcoin reserve in America,” which, given that ABTC’s treasury currently ranks #25 on the overall BTC treasuries list (18th among American firms), means there’s a lot of ground to make up.

ABTC’s president Matt Prusak tweeted that the Nasdaq debut marked the start of “a three-layer strategy to build a market-leading platform for rapid, cost-efficient Bitcoin accumulation.” This involves mining new BTC, leveraging capital markets access to “grow and actively manage” a BTC reserve, and “extend[ing] our presence across the Bitcoin economy through products, partnerships, and initiatives that accelerate adoption.”

The Trump family already operates one BTC treasury under its Trump Media & Technology Group (TMTG) brand and just struck a multi-billion-dollar deal with the Crypto.com digital asset exchange to launch a second treasury based on the exchange’s native token CRO.

But Eric Trump, who holds a 9.3% stake in ABTC, told the Financial Times that ABTC “is my baby” and “it’d be very unfair to say we’re competing against [TMTG].” Eric pointed out that ABTC “has a real skeleton, it has the backbone,” aka the capacity to mine new BTC rather than simply buy tokens. “It’s very different to a guy who gets together with his buddy in a dorm room to say we’re going to accumulate some Bitcoin.”

The day after its market debut, ABTC announced that it had expanded its mining capacity from 10 EH/s to ~24 EH/s, with ~16,300 ASIC rigs humming (loudly) away. Genoot said the company was “rapidly executing on a differentiated dual strategy to build Bitcoin-per-share … reinforcing a structural cost advantage over purchase-only Bitcoin treasury vehicles.”

World Liberty + Justin Sun = drama

However, ABTC isn’t the only Trump-linked venture in which investors appear to be losing faith. The ALT5 Sigma Corporation (NASDAQ: ALTS) that struck a $1.5 billion treasury deal last month with the Trump-linked decentralized finance (DeFi) project World Liberty Financial (WLF) also suffered a double-digit decline on Thursday, closing at $3.87 (-14%). That price is less than half the $8+ peak that ALT5 enjoyed just last week.

Meanwhile, the WLFI token on which that ALT5 treasury is based saw its fiat value fall by one-fifth at one point on Thursday. The WLFI token began public trading on September 1 at $0.20 and briefly doubled that price before falling back to around $0.23 by day’s end. As of late-Thursday, the price was hovering below $0.19.

WLFI’s early buyers acquired the tokens for the low, low price of 1.5¢ apiece, so they’re still seriously in the black. But anyone who picked up their WLFI via an exchange this Monday is likely wishing they’d stayed in bed this Labor Day.

Price movement aside, WLFI’s public debut wasn’t without controversy. To be eligible to sell/trade their WLFI tokens, holders first had to engage in an unlocking process through a WLF-controlled ‘Lockbox.’ On September 2, WLF announced that it had “blocked hacker attempts stemming from end-user compromises (not an exploit of WLFI).”

WLF clarified that it had engaged in “mass blacklisting of wallets identified as compromised (private-key loss) prior to launch. These onchain actions thwarted attempted theft from the Lockbox. We’re assisting impacted holders to regain access.”

Then, on September 4, onchain data showed that WLF had blacklisted a WLFI token address associated with Justin Sun, founder of the TRON blockchain and one of the earliest and largest WLFI investors. The wallet in question, which held a total of 595 million unlocked WLFI, made multiple transfers of the tokens, including one worth $9 million.

As word of the blacklisting spread, Sun tweeted that the wallet in question “only conducted a few generic exchange deposit tests, with very low amounts, and then created address dispersion, without involving any buying or selling, which could not possibly have any impact on the market.”

Sun/TRON acquired $75 million worth of WLFI during the token’s first two sale rounds. His HTX exchange was also one of the first platforms to agree to list WLFI for its public debut. On September 1, Sun had tweeted that “[w]e have no plans to sell our unlocked tokens anytime soon. The long-term vision here is too powerful, and I’m fully aligned with the mission.”

Some online observers have suggested that WLF was prompted to freeze Sun’s wallet due to their desire to arrest WLFI’s rapid decline by preventing a major sell-off. Less charitable observers have noted how ill-advised it is for Sun to (allegedly) try to “rugpull the President of the United States.”

Regardless, this action by WLF against one of the president’s biggest crypto supporters—Sun was the top purchaser of the president’s $TRUMP memecoin—raises all sorts of questions about what this relationship looks like going forward.

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SEC regulatory blowout: all rules must go!

In an accompanying statement, SEC Chair Paul Atkins said the agenda “covers potential rule proposals related to the offer and sale of crypto assets to help clarify the regulatory framework for crypto assets and provide greater certainty to the market.”

This week already saw the SEC and the Commodity Futures Trading Commission (CFTC) issue a joint statement on a ‘cross-agency initiative’ to realize the goals outlined in the White House’s 166-page report urging ‘regulatory clarity’ in the digital asset space. Combined with the SEC’s Project Crypto and the CFTC’s Crypto Sprints, blockchain operators will likely be allowed to shoot someone dead on Fifth Avenue by Christmas and not face any consequences.

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CFTC welcomes Polymarket, outgoing commish issues warning

Speaking of the CFTC, the path is now clear for the Polymarket prediction market to return to U.S. shores after being forced out in 2022 for serving U.S. customers without the necessary permits.

In July, Polymarket paid $112 million to acquire QCEX, a CFTC-licensed derivatives exchange, which Polymarket seems to have intended to use as a back door into the U.S. On September 3, Polymarket CEO Shayne Coplan tweeted that his company “has been given the green light to go live in the USA by the CFTC.”

Coplan was responding to a ‘no-action letter’ issued that day by the CFTC regarding QCEX’s desire to offer “fully-collateralized option contracts on various underlying commodities, assets or indices.” The CFTC said it “will not recommend the CFTC initiate an enforcement action … for failure to comply with certain swap-related recordkeeping requirements and for failure to report to swap data repositories data associated with binary option transactions and variable payout contract transactions.”

Coplan’s tweet noted that the CFTC had conducted its investigation and arrived at its conclusion “in record timing.” That speed is indeed impressive, given that as of Wednesday, only one seat on the CFTC’s five-member leadership panel is actually filled by a human being (Acting Chair Caroline Pham).

We’d be remiss if we didn’t observe that the CFTC’s speedy judgment may (or may not) have had something to do with the fact that a venture capital group affiliated with Don Jr. recently made a “double-digit millions” investment in Polymarket, resulting in Don Jr. being named a Polymarket advisor.

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Exiting CFTC commish warns ‘bridge out ahead’

Kristin Johnson, who stepped down as CFTC commissioner this week, gave a ‘farewell’ address at a Brookings Institution event on September 3. Among the points Johnson made was that the CFTC is now offering licenses to companies with few conditions to ensure there are remedies in place if a company fails. Johnson said she’d “expressed how uncomfortable I am with that approach and in part am running out of ways to properly and politely describe my discontent.”

Johnson said she was “deeply disappointed” that the CFTC failed to impose proper guidelines for prediction markets, with the result that “we have too few guardrails and too little visibility into the prediction market landscape.” Johnson said there was an “urgent need” for the CFTC to specifically address prediction markets, including their ability to offer “leveraged margin prediction contracts to retail investors.”

In a possible nod to the Polymarket-QCEX deal, Johnson said, “we’ve seen firms that have received a license and then quickly moved to auction themselves off or their newly minted license off to others.”

Johnson also addressed the ghost town that the CFTC has become, even as Congress prepares to hand the agency the bulk of the responsibility for regulating digital assets. Johnson noted that the CFTC isn’t really prepared to address spot trading of tokens, and if the CFTC is tasked with taking on “new or additional jurisdictional authority … there should be advocacy by the commissioners to ensure there is adequate representation at the commission level.”

But Johnson is out, and Pham is the only cop left on this beat (at least, until Trump’s nominee for CFTC Chair Brian Quintenz is confirmed by the Senate). And at this point, Pham has shown little sign that she shares Johnson’s concerns.

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Fed eyes crypto innovation

Finally, as further proof that America’s regulatory approach has done a complete 180° since Trump took office, the Board of Governors of the Federal Reserve announced that it will host a “conference on payments innovation” on October 21. This suitably named Payments Innovation Conference will be livestreamed at federalreserve.gov.

Among the innovations set to be discussed are “the convergence of traditional and decentralized finance; emerging stablecoin use cases and business models; the intersection of artificial intelligence and payments; and the tokenization of financial products and services.”

Fed Governor Christopher Waller said he was looking forward to “examining the opportunities and challenges of new technologies, bringing together ideas on how to improve the safety and efficiency of payments, and hearing from those helping to shape the future of payments.”

The Fed has been sounding a far more positive stance on blockchain-based issues this year, with Waller and fellow Fed Gov Michelle Bowman giving speeches at a Wyoming crypto confab last month. Among the technologies receiving their praise were stablecoins, tokenization, smart contracts and AI-assisted payments.

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Watch: Culture of BSV and the ‘Crypto’ Economy

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