Crypto executives are bracing for a painful reckoning after Democrats claimed victory in the US midterm elections and vowed to investigate the Trump family and its ties to the industry.
Democrats have made the president’s alleged self-dealing and “crypto payments” a defining issue in the election, helping them win in Republican strongholds across the United States.
Donald Trump, who pledged to make America the “crypto capital of the world,” has pursued aggressive deregulation of the industry since taking office last year, signed landmark legislation praised by the industry and pardoned executives such as Binance co-founder Changpeng Zhao, who was jailed after pleading guilty to failing to protect against money laundering.
But digital assets have also been very profitable for Trump personally, and last year he earned more than $1.16 billion in crypto sales and token royalties. He sold memecoins giving him access, launched crypto companies that faced foreign investment scrutiny, and accepted donations from crypto executives for projects such as the new White House ballroom.
Congressman Robert Garcia, who will chair the House Oversight Committee starting in January, said he and his fellow Democrats would focus “like a laser” on investigations, including the Trump family and their crypto profits.
“The president himself has a crypto scheme that allows him to make billions of dollars,” Garcia said Wednesday. “This family is billions richer.”
The Democratic victory heralds the start of a potentially painful chapter for the industry, which had boomed under Trump.
This victory came despite the sector investing nearly $200 million at the midpoint via the Fairshake Super Pac – funded by companies including Coinbase, Ripple and Andreessen Horowitz – and a separate Pac backed by stablecoin giant Tether. Donors lost many of the races they supported.
Over the past two years, Democratic senators such as Richard Blumenthal and Elizabeth Warren have repeatedly sent requests for information to companies such as Binance and stablecoin giant Tether regarding allegations of illegal activity. These demands were largely ignored by leaders.
With majorities in both chambers, Democrats now have the power to issue subpoenas which, if ignored, can result in civil or criminal penalties.
“My advice, if you have received a letter from Democrats in Congress and you haven’t responded to their liking, be prepared to respond directly,” said Ron Hammond, head of policy and advocacy at crypto market maker Wintermute.
“Even crypto companies that have received various licenses from Trump-appointed agencies while being considered major donors to Trump or his initiatives should expect increased scrutiny,” he added.
Much of Trump’s crypto profits come from his family’s business World Liberty Financial, which will become a focus of a Senate investigative committee to be chaired by Blumenthal that has examined the illicit use of cryptocurrencies.
World Liberty has previously stated that President Trump has had “no involvement in (the company) since taking office.”
Other players in the crypto industry who have benefited from the administration are also facing scrutiny. Blumenthal sent notices to Binance over its alleged role in money laundering linked to Iran and to Tether over its alleged campaign to influence cryptocurrency policy in the United States.
Binance said it “has zero tolerance for sanctions violations or illicit activities, and…does not permit any transactions with sanctioned individuals.”
Tether also has close ties to US Commerce Secretary Howard Lutnick and Cantor Fitzgerald, the Wall Street bank run by his sons. Prominent crypto companies including Coinbase and Ripple, as well as the Winklevoss twins who run digital asset exchange Gemini, are among those who have donated to Trump’s ballroom.
The threat of investigations into the crypto industry reflects looming investigations into possible favorable treatment by the corporate administration of the business world.
Democrats will rely heavily on evidence and information from crypto companies and executives, who will have more incentive to comply with their demands than the Trump administration, according to Alex Zerden, founder of Capitol Peak Strategies, a Washington-based risk consulting firm.
“There is a high likelihood of non-compliance from the executive branch,” said Zerden, who previously worked in the U.S. government in anti-corruption, financial enforcement and oversight.
“In Congressional investigations, we have seen more and more assertions of executive privilege to reduce or prohibit the disclosure of information – this will only continue or increase significantly over the last two years of Trump’s presidency,” he added.
Congressional investigations and hearings are televised, and politicians are expected to publicize their efforts to investigate corruption.
“There’s a little bit of a show factor to this,” said Joshua Riezman, chief legal and strategy officer at crypto market maker GSR. “The pressure on the industry will be real and the expectations of this Congress will be different from the last.”
Some in the crypto industry were “supportive of what was happening here or at least (not speaking out against it”), one former executive said, speaking about ties to the Trumps.
Many could fall victim to the consequences, the executive added. “It’s a question of degree: either you’ve made a deal or you’re in agreement with someone who is a Trump sycophant.”
Still, some in the industry are hopeful that the crypto industry’s efforts with Democrats in recent months will bear fruit.
“I think you’re going to see a more focused approach from this Congress, which has a lot more (crypto knowledge) to be able to separate the good from the bad elements of the industry as a whole,” Riezman said.
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