Multiple watchdog groups warned the Washington Examiner that Rep. Madison Cawthorn may have broken federal insider trading rules by hyping up an alleged pump-and-dump cryptocurrency scheme.
On Dec. 29, the embattled North Carolina congressman stood with James Koutoulas, a hedge fund investor and the mastermind behind the Let’s Go Brandon cryptocurrency, a meme coin created in response to the slogan criticizing President Joe Biden.

“LGB legends. … Tomorrow we go to the moon!” Cawthorn said in response to the photo on Koutoulas’ Instagram page, who has said publicly that he owns the Bitcoin, posted on Instagram.
The next day, LGBCoin performed exactly as predicted by the legislator.
On December 30, NASCAR driver Brandon Brown stated that the meme coin would be the principal sponsor of his 2022 season, making LGBCoin’s value skyrocket by 75%. Brown’s statement included quotes from Koutoulas, who had just been photographed with Cawthorn a few hours before.

Cawthorn’s Dec. 29 Instagram post, according to multiple watchdog groups, implies the lawmaker may have had advanced nonpublic knowledge of LGBCoin’s contract with Brown. Cawthorn’s declaration that he owns LGBCoin, according to the watchdogs, merits an inquiry by the Department of Justice and the Securities and Exchange Commission to see if the congressman broke federal insider trading rules.
“This looks really, really bad,” said Dylan Hedtler-Gaudette, the government affairs manager for Project on Government Oversight, a federal watchdog group. “This does look like a classic case of you got some insider information and acting on that information. And that’s illegal.”

“I think there’s probably a strong case here,” Hedtler-Gaudette added. “I don’t want to prejudge, but based on everything that’s out there, I think there is a very strong possibility that if someone is going to investigate this, they’re going to find something.”
If Cawthorn purchased LGBCoin before December 30 with nonpublic knowledge of the cryptocurrency’s prospective contract with Brown, according to Craig Holman, a government affairs lobbyist for Public Citizen, that would be insider trading, a federal violation punishable by prison time.

The value of all LGBCoin in circulation surpassed $570 million shortly after Brown’s declaration on December 30. By the end of January, the meme coin’s market cap had plummeted to $0.
LGBCoin’s steep decrease, according to Koutoulas, was caused by two factors: On January 4, NASCAR rejected LGBCoin’s sponsorship arrangement with Brown, and later that month, unnamed insiders with a large stake in the coin sold all of their holdings at once, causing the coin’s market value to plummet.

The rapid rise and fall of the meme coin prompted one disgruntled investor to file a class-action lawsuit in April alleging Koutoulas and other LGBCoin insiders of orchestrating a pump-and-dump scam with the digital currency.
While Cawthorn isn’t named as a defendant in the class-action case, he is listed as one of LGBCoin’s celebrity endorsers, who aided Koutoulas in inflating the coin’s market value before the scandal.

In February, Koutoulas reintroduced LGBCoin, claiming that the second version of the meme coin included limits that prevented “whales,” or persons with large holdings in the coin, from selling all of their units at once.
LGBCoin has traded roughly 95% below its peak price established in late December since its reintroduction in February.
Despite the meme coin’s terrible performance, Cawthorn has continued to tour the country with Koutoulas, advertise his ownership of the asset, and encourage his followers to buy it.

“I got Let’s Go Brandon coin,” Cawthorn said at the Conservative Political Action Conference, according to a video Koutoulas posted to his Instagram page in late February. “It’s working out well, very well.”
“This is going to the moon, baby! To the moon!” Cawthorn said while pointing to an LGBCoin logo pinned to Koutoulas’s suit jacket. “Letsgobrandon.com — get on the train. Get on the train. Take the power of currency away from the government.”

Cawthorn also performed with Koutolulas at Freedom Fight Night in Miami in March. The two were photographed pointing at the LGBCoin logo inside a UFC-style stadium.
“The blood on the logo is from the guys that sold the dip,” Koutoulas said on Instagram.
Cawthorn appeared at multiple events with Koutoulas before the meme coin spiked in late December.

“Incredible spending back-to-back nights with the affable Patriot @CawthornforNC,” Koutoulas wrote in a Dec. 5 tweet with a picture of him posing with Cawthorn, who was holding a pin with the LGBCoin logo.
Cawthorn, according to Koutoulas, owns LGBCoin.
In early April, both Koutoulas and the LGBCoin Twitter account shared a photo identifying Cawthorn as a meme coin holder. Koutoulas reportedly retweeted a message from a North Carolina politician claiming that the coin had been “endorsed.”

Koutoulas also claimed that unidentified members of Congress had acquired LGBCoin during his webcast on February 20.
“We’ve had several people who are on the America First platform, who are actually congressional candidates and/or current members of Congress that have bought with their own money, and I believe members have donated to [charities] with LGB,” Koutoulas said.
Cawthorn has not submitted any disclosures revealing that he has LGBCoin, despite the fact that lawmakers are required to declare any cryptocurrency purchases worth more than $1,000.

In a Livestream on Feb. 20, Koutoulas stated that both iterations of LGBCoin were created with the goal of the meme coin not being categorized as security for regulatory purposes.
“It is not technically or legally possible for a decentralized meme coin that exists to promote free speech and charitable giving to be classified or treated as a security,” Koutoulas said.
But, according to POGO’s government affairs manager, Hedtler-Gaudette, even if LGBCoin isn’t designated security, Cawthorn will still be subject to insider trading rules.

“No matter what, though, having advance and nonpublic information that is then used to gain an advantage in a financial market (including straight up commodities) is illegal, making my call for DOJ or SEC investigation still operative in this case,” Hedtler-Gaudette said.
Cawthorn would have to report if he bought more than $1,000 of the coin, even if it isn’t deemed security for regulatory purposes, according to Holman, the Public Citizen government relations lobbyist.

Cawthorn used his legislative authority to draft a resolution in the House in February that would “deregulate cryptocurrencies and stimulate blockchain innovation,” despite his public endorsement of LGBCoin.
While Cawthorn’s proposed resolution was vague, Holman believes Cawthorn could have violated the STOCK Act if he submitted the bill for personal gain.