Last weekend, CZ and the dog, the Argentine president and LIBRA gave the MEMECoin market a "surprise". I thought it was going to be a big wave, but it turned out to be a "big one".
If you missed these two wonderful performances, Lawyer Mankiw will give you a summary:
CZ accidentally mentioned a pet dog on social media, causing the market to speculate wildly about the dog's name. In the end, CZ announced the pet name "Broccoli", which led to a large number of MEME coins with the same name on the BNB Chain, causing a surge in on-chain transactions and network congestion. Some investors suffered losses due to market chaos and speculative trading.
Argentine President Milei announced the issuance of MEME coin LIBRA on social media and announced the contract address, triggering a market surge to a market value of $5 billion. However, just a few hours later, Milei deleted the tweet and distanced himself from the matter, causing LIBRA to plummet to less than $200 million. Some insider traders accurately bought and cashed out more than $100 million.
These two events reminded Attorney Mankiw of the opening bomb of 2025, when Trump issued MEMECoin, setting a precedent for national leaders to issue virtual tokens. These events and market reactions have once again verified the extreme speculation of the MEME coin market, and also demonstrated the direct impact of social media and celebrity effects on the crypto market.
However, when the remarks, hints and even jokes of these celebrities can cause drastic market fluctuations, how can the rights of ordinary people be protected? In particular, the LIBRA incident seems to involve legal issues such as market manipulation and insider trading. How should these phenomena be regulated by law?
Next, Attorney Mankiw will discuss one by one the legal blind spots behind the MEME coin craze.
Legal liability for celebrity speech
The two cases of CZ and the President of Argentina once again confirm the celebrity effect. Especially in an extremely speculative market like MEME coins, the influence of celebrities will be multiplied - a simple tweet, an unintentional photo, is enough to cause the MEME market to experience drastic fluctuations.
Then the question is, should these celebrities be held responsible for market fluctuations? Can their remarks constitute market manipulation?
From a legal perspective, whether a celebrity's market influence constitutes legal liability depends on whether his or her speech involves market manipulation or misleading the market.
In the traditional securities market, if executives of listed companies make misleading statements that cause stock prices to fluctuate sharply, they are often considered to constitute market manipulation or false propaganda (False Endorsement). However, in the MEME coin market, whether similar behavior should be subject to the same legal constraints is still controversial.
For example, Elon Musk has published some content about Doge on X (formerly Twitter) for a long time, and each release will inevitably cause drastic market fluctuations. The SEC investigated whether he was involved in market manipulation, but because his speech did not directly promise investment returns or manipulate transactions, it was ultimately not found to constitute an illegal act. This is similar to the case of CZ - although he triggered a market speculation frenzy, he did not directly promote the coin or mislead investors, so it is difficult to be identified as market manipulation under the current legal framework.
However, the situation of Argentine President Milei is completely different. He not only announced the launch of MEME coin LIBRA on his official social media, but also announced the contract address, which caused the market to soar to $5 billion, and then quickly plummeted to $200 million. His remarks directly affected market sentiment, and with the official government background, it was easy for investors to mistakenly believe that the token was supported by the government. Although Milei later deleted the tweet and tried to distance himself from the matter, the huge market fluctuations have already caused serious consequences.
In the US securities law, if corporate executives or celebrities make remarks that affect the market, they usually need to disclose their own interests, otherwise they may be regarded as market misleading. For example: Kim Kardashian was fined $1.26 million by the SEC for not disclosing that she received promotion fees; Floyd Mayweather was fined by the SEC for not disclosing that he received endorsement fees from the ICO project Centra Tech; in addition, Elon Musk was investigated and fined by the SEC for his tweets that affected Tesla's stock price. Although he was not identified as market manipulation, he was restricted from publishing information about Tesla.
By contrast, Milei's behavior is more similar to these cases. His tweets had a huge impact on the market trend of LIBRA coins, and then he deleted the tweets to distance himself from them. If the MEME coin market is more strictly regulated, this behavior may be considered as market misrepresentation, and may even involve market manipulation.
Therefore, although both CZ and Milei have used the influence of social media, there are significant differences in legal risks - the former is a "catalyst of market sentiment" and the latter may be a "participant in market misrepresentation."
The influence of celebrities in the MEME coin market is becoming a new challenge for legal supervision, and how to define this legal red line may become the focus of future regulators.
The regulatory challenge of insider trading
In this MEME coin carnival, there is another point that has been criticized, that is, the problem of insider trading.
In the traditional financial market, insider trading is illegal, and regulators will impose strict penalties on those who obtain market information in advance and use it to make profits. However, in the crypto market, especially in the field of MEME coins, the legal definition of insider trading is still relatively vague.
In this LIBRA incident, multiple wallets withdrew a large amount of USDC and SOL through exchanges such as Binance and Bybit within a few hours before the president's tweet was released, and then bought LIBRA accurately in the first second of its release, and sold it when the market sentiment was the craziest, eventually cashing out more than $100 million. In addition, wallet addresses related to the project were also found to have removed liquidity on a large scale, with a total cash out of more than $107 million.
In other words, some people had already ambushed in advance before obtaining information about the president's release of tokens, and accurately completed the buying and selling operations, which ultimately caused ordinary investors to become victims of liquidity withdrawal. This trading model is highly similar to insider trading in the traditional securities market.
So, does Milei's behavior constitute insider trading? This depends on two key legal issues:
Is Milei aware of the situation?
If Milei was aware of the situation and disclosed information about LIBRA tokens to certain people before the tweet was published, then from the perspective of the traditional financial market, this undoubtedly constitutes typical insider trading. On the contrary, if he was not aware of the situation, he might only be considered to have misled the market.
Is MEME applicable to insider trading regulations?
In the crypto market, especially the MEME coin market, the legal definition of insider trading is still highly controversial. The current securities law mainly targets traditional financial products such as stocks and bonds, while MEME coins are often classified as "community-driven decentralized assets" and lack a clear legal definition. Therefore, even if Milei and his team are really related to these pre-purchased addresses, they may not be directly subject to insider trading regulations in the securities market. However, in 2022, the U.S. Department of Justice (DOJ) filed insider trading charges against Ishan Wahi, a former product manager of Coinbase, his brother Nikhil Wahi, and his friend Sameer Ramani, which may be a reference.
In addition, as a government official, his status as a national leader makes this incident more sensitive. If Milei's behavior is indeed known, and even has transactions with specific investors, then his behavior may be interpreted as an abuse of public power to manipulate the market, which not only involves financial regulations, but may also touch on government integrity and ethical issues.
At present, whether the LIBRA incident really involves insider trading remains to be further investigated. But from the market perspective, this incident has revealed the "regulatory vacuum" in the crypto market: on the one hand, the remarks of celebrities and government officials can directly affect market sentiment and even trigger a crazy influx of capital; on the other hand, project parties and related stakeholders can use information asymmetry to conduct precise arbitrage, while ordinary investors bear huge risks in a highly volatile market.
All this points to a bigger problem: if there is a lack of supervision, this situation may become the norm in the MEME coin market, so how can ordinary investors protect their rights and interests?
Regulatory dilemma and investor response
In traditional financial markets, investor rights and interests are mainly protected by the Securities Law, market manipulation and insider trading regulations. However, in the current MEME coin market, these legal frameworks have obvious limitations:
MEME coins lack a clear legal definition, which makes it difficult for MEME coin transactions to apply to existing securities laws, and investors cannot seek legal relief through regulators like in the securities market;
The subject of responsibility is unclear. Especially in the LIBRA incident of the Argentine president, due to the anonymity of the MEME coin market, it is difficult to track the true identity of the arbitrageurs. Therefore, it is also difficult to investigate whether there is insider trading. In this case, even if investors suffer losses, it is difficult to hold specific entities accountable.
Lack of transparency and investor protection mechanisms. In the securities market, listed companies must disclose key information to investors, while there is basically no obligation to disclose information in the MEME coin market. Ordinary investors often chase high prices driven by FOMO (fear of missing out), but by the time they find that insider traders have withdrawn, the market has already collapsed.
In the speculative frenzy of the MEME coin market, the lack of effective supervision has made ordinary investors the ultimate risk bearers. So, when the legal framework has not yet fully covered the MEME coin market, how can investors protect their rights and interests?
First, recognize the nature of the MEME coin market. The value of MEME coins is highly dependent on market sentiment and social media consensus, rather than actual application value. Therefore, investing in MEME coins is more speculation than investment. Ordinary investors must make this clear before entering the market to avoid blindly entering the market due to FOMO (fear of missing out).
Second, be cautious about celebrity tweets. The influence of celebrities can indeed drive the market up in the short term, but this influence is often unsustainable. Once a celebrity withdraws his remarks, market sentiment quickly reverses, ultimately leading to losses for a large number of investors. Therefore, blindly following the investment advice of celebrities is extremely risky.
Furthermore, stay away from insider trading traps. Insider trading in the MEME coin market is extremely common, and it is difficult for ordinary investors to compete with institutions or whales that have made advance arrangements. Therefore, when a MEME coin is found to have an abnormal surge in a short period of time, and the source of information is questionable, it is best to be cautious and avoid becoming a target of liquidity harvesting.
Finally, pay attention to future regulatory trends. Although the MEME coin market has not yet been strictly regulated, with the occurrence of similar CZ and Milei incidents, regulators in various countries are likely to strengthen the regulation of the MEME coin market in the future. Therefore, investors should pay close attention to relevant legal developments in order to adjust their investment strategies in a timely manner.
Mankiw Lawyer Summary
The frenzied speculation in the MEME coin market can indeed create a wealth myth in the short term, but the legal and investment risks hidden behind it should not be ignored. The CZ incident and the Argentine President LIBRA incident have once again verified this point - when supervision is absent and market sentiment is fueled by celebrities, ordinary investors often become victims of capital games.
In the current market environment, the only thing investors can do is to remain rational, not be confused by the illusion of short-term surges, improve risk awareness, and prudently evaluate investment targets. At the same time, use tools such as on-chain data tracking and contract review to avoid insider trading and high-risk projects as much as possible to reduce the possibility of being harvested.
However, it is foreseeable that with the continuous advancement of global supervision of virtual assets, the disorderly development of MEME coins will also be difficult to maintain in the long run. When the enthusiasm gradually cools down, what the market will eventually face is: will it continue to grow wildly, or move towards a more compliant future?
Whatever the answer, the "shadow" of supervision may be quietly coming.
Catherine
Joy
Anais
Weatherly
Alex
Miyuki
Weiliang