By Lawrence Delevingne, Michelle Conlin, Tom Wilson and Tom Bergin
WASHINGTON (Reuters) -A pair of top Democratic lawmakers asked the U.S. securities regulator on Wednesday to preserve records related to President Donald Trump’s crypto venture World Liberty Financial and posed questions about potential conflicts of interest.
In a letter sent to acting Securities and Exchange Commission Chairman Mark Uyeda, seen by Reuters, the lawmakers requested information to “help us better understand the extent to which the Trump family’s financial interest in World Liberty Financial may be influencing your and the Commission’s activities.”
Senator Elizabeth Warren, the ranking member of the U.S. Senate’s banking committee, and Representative Maxine Waters, the ranking member of the U.S. House of Representatives’ financial services committee, signed the letter, which cited a Reuters report this week about the crypto project.
Republicans have a majority in both the U.S. House and Senate, which limits the ability of Democrats to call formal public hearings and conduct investigations. The Congressional members’ letter to the SEC does not cite any legal authority that would compel the agency to abide by its requests. It underlines the concern amongst Democratic lawmakers of the potential conflicts of interest due to the president’s businesses.
The House Financial Services Committee, led by Republicans, on Wednesday considered legislation that would regulate the broader adoption of crypto stablecoins. The Trump White House has identified promoting their use as a legislative priority.
Reuters published a story on Monday documenting how, as World Liberty Financial raised more than half a billion dollars in recent months, Trump’s family took control of the crypto venture and grabbed the lion’s share of those funds, aided by governance terms that industry experts say favor insiders.
Overall, the Trump family now has a claim on 75% of net revenues from token sales of World Liberty, and 60% from operations once the core “decentralized finance” business gets going. The arrangement means the Trump family is currently entitled to about $400 million in fees, Reuters reported. More than half of the $550 million that World Liberty has collected overall so far was raised from buyers purchasing $1 million or more in $WLFI tokens, which are not tradable, Reuters found.
‘UNPRECEDENTED FINANCIAL TIES’
The lawmakers’ letter requests that the SEC preserve and provide copies of any records or communications from the White House to the SEC regarding World Liberty, with a list of more than half a dozen Trump family members and their business partners. It asks what procedures might be in place to “prevent the Trump family’s unprecedented financial ties to the crypto industry from influencing or guiding the SEC’s decisions.”
“When the President and his immediate family stand to gain hundreds of millions of dollars from an industry the SEC regulates, the American people deserve transparency about how the Commission is maintaining its independence and fulfilling its obligations to the public, not the President’s personal financial interests,” the letter adds.
Reuters’ earlier attempts to reach the Trump family and its business partners for comment about World Liberty were unsuccessful. The Trump Organization announced in January that the president’s investments, assets and business interests would be held in a trust managed by his children and he would play no role in day-to-day operations or decision-making. The family’s business also retained an attorney to serve as an ethics adviser to “avoid any perceived conflicts of interest.”
Among the nine items the Democrats are requesting from the SEC are, also, three items specific to World Liberty investor Justin Sun and records regarding the SEC’s recent decision to pause its case against the Hong Kong-based crypto entrepreneur and his affiliated companies.
On November 25, less than three weeks after Trump won the U.S. election, Sun, who was fighting a U.S. securities fraud lawsuit, announced that he’d sunk $30 million into $WLFI – the amount the company said it needed to jumpstart operations. Sun has said his investment has since risen to $75 million. As well as its single-largest known investor, he has become an advisor to the project.
SWEEPING CHANGES
Trump has promised sweeping changes in the regulation of crypto to popularize its mainstream use in America. At the same time, the Trump family has opened multiple beachheads in crypto, already gaining hundreds of millions of dollars through related ventures.
The SEC took a strict stance on cryptocurrency under Gary Gensler, the Democratic chair under President Joe Biden. In the Trump administration, Uyeda’s SEC has created a task force to work with the industry, led by Republican Commissioner Hester Peirce, known for her favorable stance towards the sector. It also downsized the crypto enforcement team by moving lawyers working in that group elsewhere, Reuters has reported.
World Liberty announced on March 25 that it planned to launch a U.S. dollar-pegged stablecoin, called USD1.
During the House financial services committee meeting about stablecoin legislation on Wednesday, Waters said she would not support the bill unless President Trump was blocked from owning a stablecoin business through World Liberty.
“With this stablecoin bill, this committee is setting an unacceptable and dangerous precedent, validating the president and his insiders’ efforts to write rules of the road that will enrich themselves at the expense of everyone else,” she said.
(Reporting by Lawrence Delevingne in Boston, Michelle Conlin in New York, Tom Wilson and Tom Bergin in London; Editing by Tom Lasseter and Nick Zieminski)
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