Most of the 90 or so guests at Donald Trump's glitzy Christmas party in Naples, Florida, last December took home the ultimate GOP keepsake: a photo of themselves next to a smiling, thumbs-up former U.S. president.
But for Republican Rep. Madison Cawthorn of North Carolina, the biggest souvenir of the evening may have been a crypto investment: the meme coin "Let's Go Brandon." ("Let's Go Brandon" is shorthand for "f*** Joe Biden" in Trump world.)
The libertarian flair of cryptocurrencies and the LGB Project's alleged donations to veterans groups intrigued the congressman, according to James Koutoulas, a hedge fund manager and key LGB supporter, who said he told Cawthorn about the coin at Trump's Dec. 3 party.
"He gave me a check a few weeks later" after liquidating some assets, Koutoulas said in a phone call with CoinDesk. The check totaled about $150,000, he said.
CoinDesk identified Cawthorn's crypto wallet, which showed he had received 180 billion LGB tokens (about $160,000 at the time) from Koutoulas' wallet in a single transaction. "He priced it earlier," Koutoulas wrote in a text message, addressing the apparent $10,000 discrepancy.
The transfer was made on Dec. 21.
Cawthorn later predicted in a Dec. 29 Instagram comment that LGB's price would "go to the moon" the next day. When the LGB team announced a sponsorship of NASCAR driver Brandon Brown on Dec. 30, the coin actually soared. The next day, Cawthorn sold about a third of his LGB for a much more liquid cryptocurrency, Ether (ETH), earning a 94% return in dollars (though it's unclear if he converted that ETH into cash).
It was a sequence of events that would come to haunt the first-term congressman. Six months later - after a series of scandals thwarted his re-election - Cawthorn's LGB business dealings are under investigation by the U.S. House of Representatives Ethics Committee.
Triggered by allegations of insider trading and a "pump and dump" scheme, investigators are looking into whether Cawthorn improperly promoted LGB without disclosing his investment in the company. (They are also investigating an alleged "improper relationship" with an employee.)
Cawthorn officially disclosed his LGB business dealings on May 27, four days after the House of Representatives launched its ethics investigation. Although he disclosed few details, he painted a picture of a savvy trader who made a six-figure profit at just the right time. (LGB peaked on Dec. 31 and is now virtually worthless).
"I got Let's Go Brandon coins," Cawthorn barked in an Instagram video posted to Koutoulas' account on Feb. 27. "It's working out very well - very well!"
Upon closer inspection, however, Cawthorn's LGB business doesn't appear to have gone "very well" at all. At best, he broke even; at worst, he suffered a severe loss due to a mix of taxable capital gains and the bear market collapse.
CoinDesk identified Cawthorn's Ethereum network wallet by comparing public disclosures with on-chain data and confirming matches with people familiar with the transactions. The public, transparent transaction history indicates that Cawthorn likely lost money overall on his crypto trades despite early profits.
Cawthorn's team did not respond to multiple requests for comment. A spokesman told a local newspaper Wednesday that the lawmaker "is being falsely accused by partisan opponents for political gain."
CoinDesk's editorial policy places great weight on the value of privacy in the crypto community, and therefore requires an overwhelming public interest before disclosing the individuals behind pseudonymous blockchain addresses or internet handles. In this case, such an interest clearly exists, given Cawthorn's position as an elected official and the allegations under investigation.
Cawthorn's transaction history (Eastern Time).
December 21, 2021
- Cawthorn receives 180 billion LGB tokens from James Koutoulas for about $150,000. LGB's price is "essentially the same" as at the time of the handshake deal three weeks earlier, according to Koutoulas.
Dec. 29, 2021
- "Tomorrow we go to the moon!" predicts Cawthorn in an Instagram comment addressed to "LGB legends." He is pictured smiling with Koutoulas and another man, both wearing LGB buttons.
December 30 and 31, 2021
- LGB rises 70% in 48 hours, reaching an all-time high, after NASCAR driver Brandon Brown announces he will paint his car with LGB coins for the upcoming racing season.
December 31, 2021
- Cawthorn's wallet exchanges 65.8 billion LGB tokens for about 28 ETH (worth $105,000 at the time) in a series of transactions processed through the Uniswap decentralized exchange.
- Considering he paid $55,000 for that piece of LGB, he's earning a 93% return on that portion of his investment.
- Cawthorn's wallet sends 26.3 ETH to the Coinbase exchange via an intermediary wallet.
Jan. 4, 2022
- NASCAR bans Brown's LGB color scheme, sending the token on a downward slide. It is down nearly 45% from its Dec. 31 high.
- Cawthorn's wallet trades 34.8 billion LGB tokens for about 8.65 ETH (worth about $33,420 at the time) through Uniswap. He earns a 14.6% return on this trade, based on the purchase price of about $29,141 for this batch of LGB.
Jan. 17, 2022
- The LGB coin is down 64% from its all-time high and well below Cawthorn's Dec. 21 purchase price.
- Cawthorn's wallet has 62.2 billion LGB trading for 8.70 ETH ($27,998) on Uniswap. He makes a 46% loss on this last LGB trade after paying about $51,970 for that portion of the original investment.
January 25, 2022
- Cawthorn's wallet sends about 10 ETH (about $24,500) to Coinbase via an intermediary wallet. ETH is down 35% from the January 4 price, when Cawthorn purchased 8.6 ETH worth over $32,000.
Jan. 29, 2022
- Cawthorn's wallet sends 8 ETH (about $20,824 at the time) to Coinbase via an intermediary wallet. ETH is down 17% from the price on Jan. 17, when Cawthorn made his last LGB trade.
At that point, Cawthorn had sent just $142,000 in ETH in three batches to Coinbase, possibly for withdrawal since the exchange is where traders convert crypto to dollars. But it's impossible to know for sure. Its congressional documents mention ETH purchases on Dec. 31, but not sales. On the other hand, no activity after Dec. 31 is disclosed either, despite a 2012 law requiring members of Congress to disclose their investments within 45 days of a trade.
Cawthorn's purse history documents a number of LGB trades that he has not disclosed even after the statutory deadline. However, it is impossible to say exactly who controlled the wallet without hearing from Cawthorn himself.
That law, known as the STOCK Act, also prohibits officials from trading on inside information. Cawthorn's colleagues have accused him of insider trading and pointed to his LGB promotion on the eve of the NASCAR deal.
Koutoulas said he is skeptical of those allegations. "These people are saying that an Instagram post equals insider trading," the hedge fund manager said. He denied that Cawthorn knew about the NASCAR sponsorship when he agreed to buy LGB in early December. He went on to say that Cawthorn's "to the moon" comment came on Dec. 29, after Brown, the driver, himself had touted the LGB announcement.
Regardless, Cawthorn, who sold LGB for ETH (which itself crashed in January), likely lost money on his original $150,000 investment; he almost certainly received a hefty bill for short-term capital gains taxes for the 2021 trade. Based on his congressional salary for last year ($174,000), his status as a married man, and his $50,000 gain from the Dec. 31 trade, Cawthorn's New Year's Eve swaps fall into a 24% tax bracket, experts say.
In his 2022 trades from LGB to ETH, there was a mix of modest gains and large losses - at best, he came close to breaking even. It's impossible to say for sure without seeing his Coinbase trading history. LGB has since fallen to virtually zero, wiping out the rest of his position.
Other trades from the same wallet included sub-$1,000 trades for Metaverse tokens Decentraland (MANA), The Sandbox (SAND), and Polka City (POLC), as well as NFT mortgage project VERA (VRA). His wallet still contains about 0.41 ETH.
Capitol Hill insiders were stunned to learn how Cawthorn's LGB business was conducted. Most lawmakers put their assets in a blind trust, a former Hill staffer said. While that's not always the case, this former staffer noted that Cawthorn has a history of swimming against the tide.