Trump Memecoin Faces SEC Scrutiny After Nearly One Million Investors Suffer Heavy Losses

US Senate Democrats are urging regulators to investigate President Donald Trump's memecoin after almost one million investors reportedly lost a combined US$3.8 billion following the token's dramatic rise and collapse.

The request comes from Senators Elizabeth Warren and Richard Blumenthal, who have asked the US Securities and Exchange Commission (SEC) to examine whether the cryptocurrency project involved illegal fraud or unfair financial gain. Warren, one of the Senate's most influential voices on banking, financial regulation and consumer protection, has long been a leading critic of the cryptocurrency industry. Her views often shape public debate and influence discussions around financial oversight in Washington.

The controversy centres on the $TRUMP memecoin, which was launched just days before Trump's inauguration in January 2025. The cryptocurrency rapidly surged in popularity, reaching a market value of around US$9 billion within days. However, the token has since suffered a steep decline, with its market capitalisation falling below US$400 million.

According to data from cryptocurrency analytics platform CoinMarketCap, investors who purchased the token at its peak have lost around 97% of their investment.

Research by blockchain analytics firm Nansen, cited by The New York Times, estimated that nearly one million investors had collectively lost US$3.8 billion by the end of June. The figures have intensified calls for regulators to determine whether the project breached securities laws or unfairly benefited insiders.

In their letter to SEC Chairman Paul Atkins, Warren and Blumenthal argued that regulators should investigate whether the memecoin facilitated fraud or unjust enrichment. They also stressed that securities laws should be enforced consistently, regardless of the political influence of those involved.

The White House referred media enquiries to the Trump Organization, while the SEC declined to comment on the lawmakers' request.

The $TRUMP token was launched with around 80% of its supply reportedly controlled by entities linked to the Trump Organization. Memecoins are highly speculative cryptocurrencies that are often driven by internet culture, celebrity endorsements and social media attention rather than underlying economic value. Their prices can rise rapidly before falling just as quickly.

Trump has publicly positioned himself as a strong supporter of digital assets, describing his administration as being friendly towards the cryptocurrency industry. His 2025 financial disclosure also showed that he earned approximately US$636 million in royalty and licensing income linked to “Celebration Coins” during the previous year.

The senators also questioned whether the token could resemble a “rug pull”—a term commonly used in the cryptocurrency industry to describe schemes where developers inflate the value of a token before investors are left holding assets that have little or no value.

Trump has rejected concerns over his cryptocurrency earnings. In a recent media interview, he maintained that he had complied with all legal requirements and had placed responsibility for overseeing his personal financial interests with his sons while serving as president. He also highlighted his long-standing business success and stated that he was not personally involved in managing investors' funds.

Not everyone agrees that the project meets the definition of a rug pull.

Blockchain intelligence firm TRM Labs concluded in an earlier assessment that although the project's ownership structure warranted close regulatory attention because of its concentrated token holdings, it did not display the typical characteristics of a classic rug pull.

Ari Redbord, the company's Global Head of Policy and a former US federal prosecutor and Treasury official, maintained that this assessment remained valid. However, he noted that the way the project unfolded continued to raise significant concerns.

Rather than collapsing suddenly, Redbord observed that the token's value declined gradually while a relatively small group of early investors and project insiders benefited. Meanwhile, hundreds of thousands of retail investors absorbed the overwhelming majority of losses, a pattern that he warned would become increasingly difficult to justify over time, regardless of whether the project technically qualified as a rug pull.

The debate also highlights broader uncertainty over whether memecoins fall under the SEC's jurisdiction.

Shortly before Trump took office in 2025, the SEC pursued enforcement action against another alleged cryptocurrency rug pull. However, weeks later, the regulator issued guidance stating that memecoins are generally not considered securities under federal law. At the same time, the SEC clarified that simply labelling a digital asset as a memecoin would not exempt it from securities regulations if its actual characteristics suggested otherwise.

As a result, regulators are expected to continue assessing cryptocurrency projects individually.

For Warren and Blumenthal, the Trump memecoin warrants exactly that level of scrutiny. They argued that regulators should determine whether investors had been misled and whether further financial harm could be prevented before additional retail investors suffer losses.