New York Times: The Untold Story Behind Trump's Embrace of Crypto
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New York Times: The Untold Story Behind Trump's Embrace of Crypto
A series of cryptocurrency companies breaking industry boundaries have entered the stock market, attracting investors while also driving market risks to persistently high levels.
Navigating Web3 tides with focused insightsBy David Yaffe-Bellany and Eric Lipton, The New York Times
Translated by Chopper, Foresight News
This summer, a group of corporate executives pitched a business plan to Wall Street financier Anthony Scaramucci, former adviser to President Trump. They wanted Scaramucci to join a publicly traded company pursuing an unconventional strategy: boosting appeal to investors by amassing large holdings of cryptocurrency assets.
"They didn't really have to sell me on it," Scaramucci recalled. Soon after, he joined three obscure companies pursuing this strategy as an advisor. "The whole process went very smoothly."
But the boom didn't last long. This fall, as the cryptocurrency market crashed, the stock prices of all three companies Scaramucci was involved with plummeted, with the worst performer losing over 80% of its value.
The rise and fall of these companies reflects the broader cryptocurrency frenzy ignited by Trump. The self-proclaimed "first crypto president" not only ended regulatory crackdowns against crypto firms but also promoted cryptocurrency investments at the White House, signed legislation supporting crypto development, and even launched his own meme coin called TRUMP—catapulting what was once a niche sector into the center of the global economy.
Now, the ripple effects of Trump's pro-crypto stance are becoming increasingly evident.
Since the beginning of this year, a wave of new cryptocurrency ventures has emerged across industries, drawing more people into this highly volatile market. Over 250 public companies now hold cryptocurrencies—digital assets whose price swings mirror those of traditional investments like stocks and bonds.
Anthony Scaramucci, former Trump adviser, attends Emirates Bitcoin Conference in 2024
A number of companies have rolled out innovative products to lower the barriers for including cryptocurrencies in brokerage accounts and retirement plans. Meanwhile, industry executives are lobbying regulators to launch crypto tokens pegged to public company stocks, aiming to create a stock trading market built on blockchain technology.
This radical innovation wave has already exposed numerous problems. In the past two months, major cryptocurrencies have sharply declined in price, pushing companies heavily invested in digital assets toward collapse. Other emerging projects have raised red flags among economists and regulators, who warn that financial risks are accumulating.
The core concern lies in the rapid expansion of borrowing. By this fall, public companies had taken on substantial debt to buy cryptocurrencies; investor positions in crypto futures contracts exceeded $200 billion, most of which rely on leveraged funding—offering potential for huge gains but also carrying significant liquidation risks.
More alarmingly, a series of new moves in the crypto industry have deeply intertwined the crypto market with the stock market and other financial sectors. If a crisis erupts in the crypto market, the fallout could spread across the entire financial system, triggering cascading effects.
"Today, the lines between speculation, gambling, and investing have become dangerously blurred," said Timothy Massad, who served as Assistant Secretary of the Treasury for Financial Stability after the 2008 financial crisis. "This situation worries me deeply."
White House press secretary Karoline Leavitt responded that Trump's policies are helping make America the global center of cryptocurrency "by driving innovation and creating economic opportunities for all Americans."
Crypto industry executives argue these new initiatives showcase the potential of blockchain technology to reshape outdated financial systems. In their view, market volatility is precisely where profit opportunities lie.
"High risk often brings high returns," said Duncan Moir, president of 21Shares, a firm issuing crypto investment products. "Our mission is to bring these investment opportunities to more people."
The rise of this innovation wave owes much to a sweeping deregulatory environment—the most favorable regulatory window crypto firms have ever seen. For years prior, the U.S. Securities and Exchange Commission (SEC) had been locked in legal battles with the crypto industry. But in January this year, the agency established a dedicated crypto task force and has since held meetings with dozens of companies seeking regulatory clarity or product approvals.
An SEC spokesperson said the agency is working to "ensure investors have access to sufficient information to make informed investment decisions."
Headquarters of the U.S. Securities and Exchange Commission in Washington, D.C.
Notably, many of these emerging companies are linked to the expanding crypto business empire of the Trump family—a connection that blurs the line between government and commerce.
This summer, executives from World Liberty Financial, a crypto startup backed by Trump, joined the board of public company ALT5 Sigma. Once focused on recycling, the company now plans to raise $1.5 billion to enter the cryptocurrency market.
Capital Rush: A Runaway Crypto Gamble
Crypto enthusiasts have dubbed this high-risk investment surge fueled by the Trump administration "the Summer of Digital Asset Treasuries."
Digital asset treasury (DAT) companies are publicly traded firms whose primary goal is accumulating cryptocurrencies. According to data from crypto consultancy Architect Partners, nearly half of these new ventures focus on hoarding Bitcoin—the most well-known cryptocurrency—while dozens more have announced plans to purchase lesser-known coins such as Dogecoin.
Number of DAT company formations each month in 2025. Source: Architect Partners, data as of December 16
The business model is often straightforward: a group of executives identifies a small publicly traded company (e.g., a toy manufacturer), persuades it to pivot to crypto accumulation, partners with it to raise hundreds of millions from wealthy investors, and uses the funds to buy digital assets.
The core idea is to allow broader participation in crypto investing through traditional stocks tied to cryptocurrency prices. This strategy theoretically offers attractive returns. Many investment funds and asset managers have stayed away from direct crypto investments due to complex storage requirements, high costs, and hacking risks.
Investing in DAT companies effectively outsources the logistical burden of holding crypto. Yet these firms carry enormous risks: many are hastily formed, with inexperienced management teams. Data from Architect Partners shows these companies have collectively announced plans to borrow over $20 billion to buy cryptocurrencies.
"Leverage is what caused the financial crisis," warned Corey Frayer, former SEC crypto adviser. "And right now, we're seeing massive leverage building up."
Some DAT companies have already run into operational or leadership crises, resulting in heavy investor losses.
After Forward Industries, a public company, pivoted to become a DAT firm, it took a heavy position in SOL. In September, the company raised over $1.6 billion from private investors, and its stock briefly surged to nearly $40 per share.
Allan Teh from Miami manages assets for a family office. He invested $2.5 million in Forward Industries this year. "At the time, everyone thought this strategy was foolproof—crypto prices would just keep going up," Teh recalled.
But as the crypto market crashed, Forward Industries' stock fell to $7 per share this month. The company announced plans to spend $1 billion over the next two years buying back shares, but the move failed to halt the decline.
"The music stopped, the party’s over. Now I’m worried—can I get out safely?" Teh, who has already lost about $1.5 million, asked. "How deep will this loss go?" Forward Industries declined to comment.
The proliferation of DAT companies has drawn scrutiny from the SEC. "Clearly, we’re concerned," said SEC Chair Paul Atkins in an interview at a Miami crypto conference last month. "We’re watching this closely."
Behind this new frontier in crypto stands strong support from the Trump family.
Founders of World Liberty Financial include Donald Trump Jr. and Zach Witkoff
In August, World Liberty Financial announced that its founders—including the president's son, Eric Trump—would join the board of ALT5 Sigma. The public company plans to accumulate WLFI, a token issued by World Liberty Financial (Eric Trump currently holds the title of strategic advisor and board observer).
This partnership appears poised to generate quick profits for the Trump family. According to a revenue-sharing agreement published on World Liberty Financial’s website, the Trump family’s business entities receive a cut every time a WLFI token is traded.
Soon after, ALT5 Sigma’s operations deteriorated rapidly. In August, the company disclosed that an executive at one of its subsidiaries had been convicted of money laundering in Rwanda, and the board was investigating other "undisclosed matters." Shortly afterward, ALT5 Sigma suspended its CEO and terminated two other executives.
Since August, the company’s stock has plunged 85%. An ALT5 Sigma spokesperson said the company "remains confident in its future."
Flash Crash: Trillions Vanish Overnight
The recent turmoil in the cryptocurrency market traces back to a single night in October.
Fueled by Trump’s policies, the crypto market had risen steadily for most of the year. But on October 10, Bitcoin, Ethereum, and dozens of other cryptocurrencies suddenly crashed in a flash crash.
The immediate trigger was Trump’s announcement of new tariffs on China, which sent shockwaves through the global economy. The reason crypto markets were hit so hard, however, lies in the massive leveraged positions that had driven the rally.
On crypto exchanges, traders can use their digital assets as collateral to borrow fiat currency or increase their crypto exposure using leverage. According to Galaxy Research, global crypto lending grew by $20 billion in the third quarter alone, reaching a record high of $74 billion.
Previously, the riskiest leveraged crypto trades occurred mostly overseas. But in July, Coinbase, the largest U.S. crypto exchange, launched a new investment product allowing traders to place leveraged bets on Bitcoin and Ethereum futures with up to 10x leverage. Prior to this, federal regulators had rescinded guidance restricting such leveraged trading, clearing the way for Coinbase’s new product.
In July, Coinbase launched a 10x leveraged crypto trading tool
The October flash crash did not result in the kind of industry-wide collapse seen in 2022, when several major crypto firms went bankrupt, but it sounded a warning bell about systemic risks lurking in the crypto space.
Leveraged trading magnifies losses during downturns. Exchanges automatically liquidate positions and sell off collateral, a process that often accelerates price declines.
Data from CoinGlass shows that on October 10 alone, at least $19 billion worth of leveraged crypto positions were forcibly liquidated, affecting 1.6 million traders. The liquidations were concentrated on platforms like Binance, OKX, and Bybit.
The crash triggered a surge in trading traffic, causing technical outages at several major exchanges and preventing users from moving funds. Coinbase acknowledged that some users experienced "delays or reduced system performance during trading."
Derek Bartron, a software developer from Tennessee and also a crypto investor, said his Coinbase account froze during the crash. "I wanted to close my position, but couldn’t do anything," Bartron said. "Coinbase essentially locked our money. We could only watch our assets lose value, helpless."
Bartron said he lost around $50,000 in crypto assets in the days following the crash, partly because he couldn’t exit his positions in time.
A Coinbase spokesperson responded that the company provides automated risk management tools, "which functioned normally during this market event, and our platform remained stable throughout."
A Binance spokesperson admitted the exchange "experienced technical issues due to a spike in trading volume" and said compensation measures had been implemented for affected users.
Crazy Experiment: The Regulatory Quagmire of Tokenization
One summer evening, crypto entrepreneurs Chris Yin and Teddy Pornprinya dressed in formal wear and attended a black-tie gala at the Kennedy Center in Washington, D.C.
The event was star-studded. Chris Yin, wearing a tuxedo bought the night before, met JD Vance, the vice president with roots in Silicon Valley venture capital; he and Teddy Pornprinya spoke with Scott Bessent, former hedge fund manager and current U.S. Treasury Secretary; they even took a photo with President Trump, who gave a thumbs-up to the camera.
Yin and Pornprinya were there to pave the way for their startup, Plume. The company is pushing a disruptive innovation aimed at expanding blockchain technology into broader financial applications.
For months, Plume has been seeking permission from U.S. regulators to build an online platform that issues crypto tokens representing real-world assets, including public company stocks, farms, oil wells, and more.
Plume founders Chris Yin and Teddy Pornprinya at the Empire State Building
Plume has already launched such tokenized products overseas, allowing clients to trade asset-backed tokens like cryptocurrencies. But this business, known as asset tokenization, exists in a legal gray area in the United States. Decades-old securities laws impose strict rules on equity offerings across asset classes, requiring detailed disclosures to protect investors.
This year, asset tokenization has become one of the hottest concepts in the crypto industry. Executives claim tokenized stocks could make trading faster and more efficient, enabling a 24/7 global market. Kraken, a major U.S. crypto exchange, already offers blockchain-based stock trading services to overseas customers.
Crypto executives say blockchain-based trading, recorded on public ledgers, is more transparent than traditional finance. "All transactions are traceable and auditable," said Kraken CEO Arjun Sethi. "It’s almost risk-free."
Representatives from Kraken and Coinbase have met with the SEC to discuss regulatory frameworks for tokenized assets. Meanwhile, Plume is seeking a legal pathway to expand its operations in the U.S.
But this race to launch tokenized products has sparked concerns among current and former regulators, as well as leaders of traditional financial giants.
In September, Federal Reserve economists warned that asset tokenization could transmit crypto market risks into the broader financial system, "undermining policymakers’ ability to maintain payment system stability during times of stress."
SEC Chair Paul Atkins expressed optimism about tokenized stocks, calling them a "major technological breakthrough." "Under securities law, the commission has broad discretion to provide regulatory support to the crypto industry. I am determined to make this happen," Atkins said at an asset tokenization roundtable in May.
To advance regulatory compliance, Chris Yin and Teddy Pornprinya have taken multiple steps. In May, they met with the SEC’s crypto task force; they provided chart support for a White House report on the crypto industry; and they established Plume’s U.S. headquarters on the 77th floor of the Empire State Building.
At the black-tie gala in Washington this summer, Trump’s inner circle showed keen interest in the two founders. "They knew about Plume," Teddy Pornprinya recalled. "Everyone seemed familiar with our business."
Weeks later, Plume announced a key partnership, forming a business alliance with World Liberty Financial, the Trump family’s venture.
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