Inside Madison Cawthorn's $150K Crypto Bet: Here's the Wallet Under Ethics Investigation

The North Carolina firebrand is under investigation for allegedly “pumping and dumping” the “Let’s Go Brandon” meme coin. CoinDesk found his Ethereum wallet.

AccessTimeIconJun 1, 2022 at 7:02 p.m. UTC
Updated Jun 2, 2022 at 5:19 p.m. UTC

Danny is CoinDesk's deputy business editor. He owns BTC, ETH and SOL.

Most of the 90-odd guests at Donald Trump’s glitzy Christmas party in Naples, Fla., last December left with the ultimate GOP keepsake: a photo of themselves beside a smiling, thumbs-upping former POTUS.

But for Rep. Madison Cawthorn, the Republican firebrand from North Carolina, the night’s biggest souvenir was perhaps a crypto investment: the “Let’s Go Brandon” meme coin. (“Let’s Go Brandon” is Trump world shorthand for “f*** Joe Biden.”)

Crypto’s libertarian flair and the LGB project’s reputed donations to veterans’ groups intrigued the congressman, according to James Koutoulas, a hedge fund manager and key LGB backer who said he told Cawthorn about the coin at Trump’s party in Naples.

“He gave me a check a couple of weeks” later, after liquidating some assets, Koutoulas told CoinDesk in a phone call. The check was for about $150,000, Koutoulas said.

CoinDesk identified Cawthorn’s Ethereum network wallet by cross-referencing the public disclosures with on-chain data and confirming the matches with people familiar with the trades. The public, transparent transaction history indicates that all told, Cawthorn likely lost money on his crypto trades despite early wins.

The wallet received 180 billion LGB tokens, which were worth around $160,000 at the time, from Koutoulas’ wallet in a single transaction. “He locked in price earlier,” Koutoulas wrote in a text message, addressing the apparent $10,000 discrepancy.

The transfer went through on Dec. 21.

Cawthorn later predicted LGB’s price would the next day “go to the moon” in a Dec. 29 Instagram comment. When the LGB team announced a sponsorship of NASCAR driver Brandon Brown on Dec. 30, the coin indeed rallied mightily. The next day, Cawthorn sold off roughly a third of his LGB for a considerably more liquid cryptocurrency, ether (ETH), fetching a 94% return in dollar terms (though it’s unclear if he moved that ETH to cash).

It was a sequence of events that would come to haunt the first-term congressman. Six months later – after a sea of scandals sunk his reelection bid – Cawthorn’s LGB trades are under investigation by the U.S. House Committee on Ethics.

Spurred by allegations of insider trading and a “pump and dump” scheme, investigators are examining whether Cawthorn “improperly promoted” LGB without disclosing his investment in it. (They’re also looking into an alleged “improper relationship” with a staffer.)

Cawthorn formally disclosed his LGB trades on May 27, four days after the House launched its ethics investigation. Short on details, his disclosure nonetheless paints a picture of a savvy trader who cashed out a six-figure profit at just the right time. (LGB peaked on Dec. 31 and is now essentially worthless.)

“I got Let’s Go Brandon coin,” Cawthorn barked in a Feb. 27 Instagram video posted to Koutoulas’ account. “It’s working out very well – very well!”

On closer inspection, however, Cawthorn’s LGB trades don't appear to have worked out “very well” at all. He’s at best close to even; at worst, he’s down bad from a mix of taxable capital gains and the bear market slump.

Cawthorn’s team didn't respond to multiple requests for comment. A spokesperson told a local paper on Wednesday that the lawmaker is being “falsely accused by partisan adversaries for political gain.”

CoinDesk’s editorial policy gives great weight to the crypto-community value of privacy and therefore requires an overwhelming public interest before revealing the individuals behind pseudonymous blockchain addresses or internet handles. In this case, there is clearly such an interest, given Cawthorn’s position as an elected official and the allegations under investigation.

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When and how Madison Cawthorn’s wallet traded LGB tokens.

Cawthorn’s transaction history (Eastern time)

Dec. 21, 2021

  • Cawthorn receives 180 billion LGB tokens from Koutoulas for around $150,000. LGB’s price is “materially the same” as it had been at the time of their handshake deal three weeks prior, according to Koutoulas.

Dec. 29, 2021

  • “Tomorrow we go to the moon!” Cawthorn predicts in an Instagram comment directed at “LGB legends.” He’s pictured smiling with Koutoulas and another man – both of whom are wearing LGB buttons.

Dec. 30-31, 2021

  • LGB surges 70% in 48 hours, hitting all-time highs after Brown, the NASCAR driver, announces he will paint his car with LGB coin regalia for the upcoming race season.

Dec. 31, 2021

  • Cawthorn’s wallet trades 65.8 billion LGB tokens for around 28 ETH (then worth $105,000) in a series of transactions routed through the decentralized exchange Uniswap.
  • Considering that he paid $55,000 for this chunk of LGB, he notches 93% returns on this portion of his investment.
  • Cawthorn’s wallet sends 26.3 ETH to the Coinbase exchange via an intermediary wallet.

Jan. 4, 2022

  • NASCAR nixes Brown’s LGB paint scheme, sending the token tumbling. It is down nearly 45% from its Dec. 31 highs.
  • Cawthorn’s wallet trades 34.8 billion LGB tokens for about 8.65 ETH (then worth around $33,420) through Uniswap. He notches a 14.6% return on this trade, based on the roughly $29,141 purchase price for this batch of LGB.

Jan. 17, 2022

  • LGB coin has fallen 64% from all-time highs and is well below Cawthorn’s Dec. 21 purchase price.
  • Cawthorn’s wallet trades 62.2 billion LGB for 8.70 ETH ($27,998) on Uniswap. He takes a 46% loss on this final trade involving LGB, having paid about $51,970 for this portion of the initial investment.

Jan. 25, 2022

  • Cawthorn’s wallet sends around 10 ETH (around $24,500) to Coinbase via an intermediary wallet. ETH has tumbled 35% from its price on Jan. 4, when Cawthorn acquired 8.6 ETH then worth over $32,000.

Jan. 29, 2022

  • Cawthorn’s wallet sends 8 ETH (then around $20,824) to Coinbase via an intermediary wallet. ETH is down 17% from its Jan. 17 price, when Cawthorn made his final LGB trade.

At this point, Cawthorn has sent just about $142,000 in ETH to Coinbase in three batches, possibly for cash out, because the exchange is where traders convert crypto to dollars. But it’s impossible to know for sure. While his congressional disclosures detail an ETH buy on Dec. 31, they never mention a sale. Then again, they fail to disclose any activity after Dec. 31, anyhow, despite a 2012 law requiring congressmen to disclose their investments within 45 days of a trade.

Cawthorn’s wallet history documents a series of LGB trades that he still hasn't disclosed even well after the law’s deadline. That said, it’s impossible to say precisely who controlled the wallet without hearing from Cawthorn himself.

That law, known as the STOCK Act, also prohibits officials from trading on insider 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 the 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 further said Cawthorn’s “to the moon” comment Dec. 29 came after Brown, the driver, had himself teased the LGB announcement.

Regardless, Cawthorn, who sold LGB for ETH (which itself was crashing through January) likely lost money on his $150,000 initial investment; he almost certainly ran up a hefty short-term capital gains tax bill for the 2021 trades. Based on his congressional salary for last year ($174,000), his married status and his $50,000 gain from the Dec. 31 trades, Cawthorn’s New Year’s Eve swaps fall into a 24% tax bracket, experts said.

His 2022 trades from LGB to ETH mix modest gains with heavy losses – at best he came out close to even. It’s impossible to know for sure without seeing his Coinbase trading history. LGB has since fallen to virtually zero, wiping out the remainder 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), plus the NFT (non-fungible token) mortgage project Vera (VRA). His wallet still holds about 0.41 ETH.

Capitol Hill insiders were flummoxed when told how Cawthorn’s LGB trades were executed. Most lawmakers put their assets in a blind trust, one former Hill staffer said. Although that’s not always the case, that former staffer noted Cawthorn’s history of going against the grain.

DISCLOSURE

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Danny is CoinDesk's deputy business editor. He owns BTC, ETH and SOL.

CoinDesk - Unknown

Danny is CoinDesk's deputy business editor. He owns BTC, ETH and SOL.