Two men, Benjamin Chow and Hayden Davis, co-founders of the crypto exchange Meteora and venture capital firm Kelsier Labs, are facing serious legal challenges related to claims of fraud and market manipulation. A federal class action lawsuit initiated in April has expanded, accusing them of exploiting “celebrity association” to perpetuate a scheme misleading investors.
Initially, the lawsuit focused on a particular memecoin, $M3M3, but new allegations include racketeering, with claims that Chow and Davis rigged the market to favor another cryptocurrency called $LIBRA. This coin, promoted by Argentine President Javier Milei, rapidly declined in value after its launch.
In a recent amendment to the lawsuit, Chow and Davis have been accused of orchestrating the pump-and-dump of at least 15 cryptocurrencies, including $MELANIA, which gained notoriety after First Lady Melania Trump promoted it on social media on the eve of her husband Donald Trump’s second inauguration. Although Melania Trump is not directly named as a defendant, the lawsuit alleges that her endorsement provided a guise of legitimacy, which the plaintiffs claim misled investors.
The amended complaint outlines a “six-step playbook for pump-and-dump fraud” that Chow and Davis allegedly developed prior to the launch of $MELANIA. It claims that while Meteora created the technical infrastructure for the coins, Kelsier secured funding and managed promotions. For the launch of $MELANIA, Kelsier purportedly enlisted various cryptocurrency influencers to push the coin online.
Upon its release, the coin saw an impressive rise in value, increasing twelve-fold to a peak market capitalization of $1.6 billion; however, it has since lost approximately 95 percent of its worth. The lawsuit contends that Chow and Davis controlled a significant portion of the coin’s supply, which permitted them to sell off their holdings at a profit before the collapse, leaving regular investors with substantial losses.
The plaintiffs argue that the association with Melania Trump was misleading and detrimental, asserting that it compromised public trust in cryptocurrencies. The document states, “The misuse of Melania Trump’s name magnified the harm… injecting an element of political and cultural credibility into what was, in reality, a standard pump-and-dump.”
As these legal proceedings continue, the implications for those involved in the cryptocurrency market are profound, signaling a need for tighter scrutiny around celebrity endorsements and the potential for fraudulent practices within this rapidly evolving financial landscape.
