You’d think a twice-impeached president would be keen not to paint a massive target on his back for his many enemies. Yet Donald Trump’s instincts are always for forward motion, in all directions, all the time. He is a lucky general, but could Liberty Financial yet be his Waterloo?

While the President has to keep his financial dealings at arm’s length, his sons have been busy taking advantage of the most crypto-positive administration in US history. World Liberty Financial is owned by Eric and Donald Jr, with Barron Trump listed on its promotional materials as “DeFi Visionary”.

Liberty’s activity so far has been to mint its own digital “tokens”, and sell some: notably $75 million to Justin Sun, a serial blockchain investor. Now, Liberty is embarking on a new era in its financial engineering journey. It is seeking $1.5 billion from investors for a public company, whose main asset will be these tokens.

As an asset, the tokens are already of dubious worth. Their key underlying value is simply in allowing token owners to “vote” on changes to the Liberty blockchain. Establishing a stock company at least gives the Trumps a personal off-ramp. There are a hundred billion potential tokens in Liberty. If they were widely sold off, that would tank the price of each individual token; in this system, the stock money can simply be banked without any effect.

The positive case for selling stock might be that the cash allows Liberty to diversify its asset base and buy something with more obvious value, such as property or Bitcoin. The downside is that it has effectively double-dipped. If the plan goes through, there will be token owners, and then the owners of the company that holds the rights to mint the tokens. How aligned are the interests of these two groups? The stockholders would like to see more tokens; the token-holders want scarcity to drive up the price. Both groups will still be slightly confused as to the ultimate point of the enterprise.

One path to profit could be through Aave, which is one of the largest decentralised lending protocols. Think of it as a kind of crypto bank: users deposit tokens and earn interest, then someone else borrows them and pays that interest. Liberty would skim a percentage between the interest rates of lenders and borrowers on these tokens.

With the interest payable only in tokens, these shadow banks are still a purely speculative system built on a speculative system. There are no guardrails or minimum deposit guarantees, as there are with real banks. And these kinds of exchanges have already had some major blow-ups. In 2022, the Celsius Network and a product called Anchor both collapsed into insolvency within months of each other. The CEO of Celsius, Alex Mashinsky, is now doing 12 years’ jail time for securities fraud. The Anchor Protocol’s collapse wiped out over $40 billion in market value. These were not fringe platforms: they were central to the space.

We should hope that no such fate befalls the ersatz, wonky architecture of Liberty. A Liberty scandal would not be good TV. It’s no Stormy Daniels. It’s no January 6. Rather, its sheer complexity could be either protective or destructive. After all, Watergate was a dense series of interconnecting scandals, all individually manageable, but whose sheer drip-drip effect in televised attrition at the hands of a House committee eventually accumulated to a point where the Commander-in-Chief was choppered off the White House lawn into retirement. At the same time, Iran-Contra left Ronald Reagan largely unscathed, as the public tired of hearing about who Oliver North spoke to on which day.

The Trumps should hope that if World Liberty Financial blows up, it takes the second path. It is certainly a very boring way to make a very risky bet.

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Gavin Haynes is a journalist and former editor-at-large at Vice.

@gavhaynes

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