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LIBRA & YZY: Unveiling Insider Trading Scandals and Lessons for DeFi
Beginner
2025-08-27 | 15m
The cryptocurrency world has been rocked by a series of high-profile insider trading scandals involving celebrity-endorsed tokens, most notably
LIBRA
and
YZY
. These cases have exposed
systemic vulnerabilities
within the decentralized finance (DeFi) ecosystem and raised serious questions about market integrity, regulatory oversight, and the ethical responsibilities of influential promoters. The LIBRA token, allegedly backed by Argentine President Javier Milei, and YZY, launched by renowned rapper Kanye West, both followed strikingly similar patterns: spectacular initial price surges followed by catastrophic collapses that left retail investors with significant losses while insiders walked away with millions.
This article examines these events through
multiple dimensions
: the mechanics of scams as revealed through blockchain analysis, the role of celebrity endorsements in amplifying these schemes, the impact on ordinary investors, and the implications for DeFi's foundational principles of transparency and decentralization. Furthermore, it explores the emerging regulatory responses and measures being implemented by centralized exchanges to prevent such occurrences.
The LIBRA and YZY Token Scandals: A Narrative of Deception
The LIBRA token scandal began in February 2025 when Argentine President Javier Milei publicly endorsed the token on social media, claiming it would boost Argentina's economic growth. Within minutes of his endorsement, the token's price
skyrocketed to $4.96, and its market capitalization approached
$5 billion. This euphoria was short-lived; within hours, the price
crashed by 85% as the development team withdrew $90 million from liquidity pools, causing panic selling and devastating losses for retail investors.
The YZY token episode followed a nearly identical script in August 2025. Kanye West announced the launch of his token on the Solana blockchain, creating immediate market excitement. Within 40 minutes of launch, YZY reached a
market cap of $3 billion, only to collapse to one-third of that value shortly afterward. Blockchain analysis firm Nansen reported that 62,465 wallets traded YZY on its first day, with the top 500 wallets realizing profits of
$50.4 million while retail investors accumulated losses of
$21.4 million.
Table: Key Statistics of LIBRA and YZY Token Scandals
| Metric | LIBRA Token | YZY Token |
| Peak Market Cap | $5 billion | $3 billion |
| Price Drop | 85% | 66% |
| Insider Profits | $100+ million | $50.4 million |
| Retail Losses | $251 million | $21.4 million |
| Number of Affected Wallets | N/A | 62,465 |
Both cases exhibited classic
pump-and-dump dynamics, where influential promoters created artificial demand through celebrity endorsements, allowing insiders to sell their holdings at inflated prices before the inevitable crash. The LIBRA team reportedly made over
$100 million from the scheme, while YZY's internal wallets extracted
$50.4 million in profits.
What made these schemes particularly damaging was the
premeditated coordination behind them. In both cases, evidence suggests that insiders had prior knowledge of the celebrity endorsements and positioned themselves accordingly before the public announcements. The LIBRA team's wallets were prepared to withdraw liquidity at the peak, while YZY's insiders bought tokens minutes after launch and sold them during the initial price surge.
Wallet Activities and On-chain Forensics
Blockchain analysis has been instrumental in uncovering the sophisticated insider trading networks behind LIBRA and YZY. Through
wallet clustering and
transaction pattern analysis, researchers have identified clear connections between previous celebrity token scams and these latest occurrences.
In the YZY case, analysis by Bubblemaps revealed that
14 wallet addresses received funds from centralized exchanges exactly 24 hours before Kanye West's announcement. These wallets then began purchasing YZY tokens within
one minute of the official announcement, realizing profits of approximately
$12 million. This precise timing strongly suggests prior knowledge of the launch: a hallmark of insider trading.
The same pattern emerged with LIBRA, where
on-chain forensics showed that multiple high-profit addresses were controlled by the same entity. These addresses had been funded before the official announcement and executed large-scale trades immediately after President Milei's endorsement. MistTrack analysis identified
8 wallets associated with the LIBRA team that collectively realized profits exceeding
$100 million.
Table: Chain Analysis Findings in LIBRA and YZY Cases
| Analysis Aspect | LIBRA Token | YZY Token |
| Pre-launch Wallet Funding | Yes | Yes (24 hours before) |
| First Transaction Timing | Minutes after endorsement | 1 minute after launch |
| Connected Profit | $100 million | $12 million |
| Connected Wallets | 8 | 14 |
| Link to Previous Schemes | MELANIA, TRUMP | TRUMP, LIBRA |
Perhaps most revealing is the
interconnectedness of these operations. Investigators discovered that the same wallets that profited from earlier celebrity tokens like TRUMP and MELANIA were also involved in both LIBRA and YZY. For instance, a wallet known as "Naseem," which had gained over
$100 millionfrom TRUMP tokens, was also among the first buyers of YZY, investing
$250,000 and realizing
$800,000 in profits while still holding another
$600,000 in YZY tokens.
These connections extend beyond individual wallets to encompass entire
sniper networks—groups of wallets that coordinate to attack new token launches. Detective, a blockchain investigator, identified two sniper wallets that extracted a total of
$23 million from both LIBRA and YZY tokens.
The Role of Celebrity Endorsements in Crypto Projects
The power of celebrity influence on cryptocurrency is undeniable. When a public figure with millions of followers promotes a token, it creates an immediate
FOMO
(fear of missing out) effect among their audience. This phenomenon was evident in both LIBRA and YZY: President Milei's endorsement sent LIBRA's price soaring, while Kanye West's reputation and cultural influence generated instant credibility and demand for YZY.
However, the critical question is whether these celebrities understood what they were promoting and the consequences of their endorsements. In the case of LIBRA, President Milei later
distanced himself from the project, claiming he didn't understand the details and emphasizing that LIBRA was a private initiative unrelated to him or the Argentine government. This retreat raises serious questions about the due diligence performed by celebrities before lending their names to crypto projects.
The problem is compounded by the
financial arrangements between celebrities and project teams. While not always disclosed, it's common for celebrities to receive substantial compensation for promoting tokens—either through direct payments, allocated token reserves, or profit-sharing arrangements. These financial incentives can create misaligned priorities where the celebrity's interest in quick profits outweighs their concern for their followers' financial well-being.
The aftermath of these scandals suggests a growing
consumer skepticism toward celebrity-endorsed crypto projects. As more investors become aware of the pump-and-dump patterns associated with these tokens, the effectiveness of celebrity endorsements may diminish. This trend could ultimately benefit the space by shifting focus from speculative celebrity tokens to projects with genuine utility and technological innovation.
Impact on Retail Investors
While insiders counted their profits, ordinary investors bore the brunt of the LIBRA and YZY collapses. The human impact of these schemes extends far beyond financial losses, damaging trust in cryptocurrency as a whole and potentially deterring future adoption.
Nansen Research reported that
86% of traders who invested in LIBRA after President Milei's endorsement lost money, with cumulative losses reaching
$251 million. Similarly, for YZY, nearly
16,000 wallets recorded losses exceeding
$10each, while only
9,413 wallets realized profits over the same amount. These numbers represent real people—many of whom invested significant portions of their savings based on celebrity recommendations without understanding the risks.
The psychological impact on these investors can be severe. Online discussions following the crashes revealed stories of investors who had lost
wedding funds,
retirement savings, and money earmarked for their children's education. One investor commented that they now get a headache whenever they see the word "Bitcoin," while others described feeling hopeless and betrayed by celebrities they had trusted.
What makes these losses particularly troubling is the
demographic profile of typical celebrity token investors. Research shows that cryptocurrency ownership is disproportionately concentrated among
younger generations—Millennials and Gen Z—who often have limited investment experience and are more susceptible to influencer marketing 10. Many view crypto as their primary wealth-building tool, making them more likely to invest heavily in speculative assets promising quick returns.
The disproportionate impact on these groups raises
intergenerational equity concerns. If younger investors become disillusioned with crypto due to predatory schemes, they may miss out on legitimate opportunities in the digital asset space or develop lasting risk aversion that could affect their long-term financial planning. Some experts warn that a major crypto crash could "severely undermine trust" in capital markets among young people, potentially altering their investment behaviors for decades.
Transparency and Governance in DeFi: Ideals vs Reality
The LIBRA and YZY scandals expose a significant gap between DeFi's theoretical ideals of transparency and decentralization and the reality of how many projects actually operate. While blockchain technology does provide unprecedented transparency into transactions, this alone hasn't prevented sophisticated manipulation schemes.
The fundamental promise of DeFi is
open participation and
permissionless innovation. However, in practice, many projects, particularly celebrity-backed tokens , exhibit significant centralization in their token distribution and decision-making processes. YZY's tokenomics, for instance, reserved
70% of tokens for internal parties including Yeezy Investments LLC, the team, and an ecosystem fund. Similarly, LIBRA's distribution was heavily weighted toward insiders who could manipulate the market.
This concentration of tokens creates
governance vulnerabilities. When a small group controls most of the supply, they can easily manipulate prices through coordinated buying and selling as evidenced in both LIBRA and YZY. This reality contradicts the decentralized ethos that DeFi claims to embody and creates power imbalances that disadvantage retail participants.
To address these issues, the DeFi community needs to develop
better governance models that prioritize fairness and investor protection without sacrificing innovation. This could include standardized token distribution guidelines, transparent vesting schedules for team tokens, and mechanisms to prevent excessive concentration of ownership.
Regulatory Responses and Exchange Measures
In the aftermath of the LIBRA and YZY scandals, regulators and centralized exchanges face increasing pressure to implement stronger investor protections while balancing innovation concerns. The current regulatory landscape remains fragmented, creating jurisdictional challenges for overseeing globally accessible DeFi protocols.
The U.S. Securities and Exchange Commission (SEC) has increasingly
expanded its oversight of cryptocurrency markets, focusing particularly on celebrity-endorsed tokens that may qualify as unregistered securities. While neither LIBRA nor YZY faced immediate regulatory action in the United States, their patterns mirror earlier cases that resulted in SEC interventions, such as those involving Steven Seagal and Floyd Mayweather Jr.
Beyond enforcement actions, regulators are considering
broader frameworks for cryptocurrency markets. The European Union's Markets in Crypto-Assets (MiCA) regulation represents one comprehensive approach, imposing strict requirements on crypto asset issuers and service providers. Similar proposals are being debated in the U.S., though political divisions have slowed legislative progress.
CEX have also implemented protective measures in response to these scandals.
Many now conduct more rigorous due diligence before listing tokens, particularly those associated with celebrities. Some have created explicit policies against supporting tokens with unfair distributions or unclear governance structures. However, the competitive pressure to list popular tokens sometimes outweighs these concerns, creating an ongoing tension between consumer protection and business interests.
Lessons Learned and the Path Forward
The LIBRA and YZY insider trading scandals offer painful but valuable lessons for the cryptocurrency ecosystem. They reveal systemic vulnerabilities that require coordinated responses from developers, regulators, exchanges, and investors themselves.
First, these cases demonstrate that
blockchain transparency alone cannot prevent market manipulation—it can only document it after the fact. While chain analysis was crucial in uncovering these schemes, it didn't prevent billions in losses from occurring. This suggests that preventive measures, such as improved token design and better governance mechanisms, are equally important.
For the DeFi community, these events should serve as a
wake-up call to address internal governance issues before they invite heavy-handed external regulation. Projects that prioritize fair launches, transparent tokenomics, and community governance will likely enjoy longer-term sustainability than those designed primarily for insider enrichment.
Finally, for investors, the lessons are about
due diligence and
risk management. The cryptocurrency market remains highly speculative, especially for celebrity-backed tokens and memecoins. Investors should never allocate more than they can afford to lose to these assets and should maintain a diversified portfolio that includes less speculative crypto assets.
While LIBRA and YZY stories are ultimately cautionary tales, they contribute to the maturation of the cryptocurrency ecosystem. Each scandal provides data points that can inform better practices, smarter regulations, and more discerning investment behaviors.
References:
A*Invest. (2025, August 25).
On-chain analysis links $23M YZY, LIBRA profits to insider trading. Retrieved August 27, 2025, from
https://www.ainvest.com/news/onchain-analysis-links-23m-yzy-libra-profits-insider-trading-2508/
Kines, L. (2025, August 21).
Insiders cash in millions as Ye (formerly Kanye West) apparently issues YZY token. CoinDesk. Retrieved August 27, 2025, from
https://www.coindesk.com/markets/2025/08/21/insiders-cash-in-millions-as-ye-formerly-kanye-west-apparently-issues-yzy-token
O'Neal, C. (2025, August 22).
Kanye West's YZY token hits $3B before insider concerns surface. CoinMarketCap Academy. Retrieved August 27, 2025, from
https://coinmarketcap.com/academy/article/kanye-west-yzy-token-hits-dollar3b-before-insider-concerns-surface
YZY token bloodbath sees coordinated snipers extract millions from Kanye fans. (2025, August 22). CoinTelegraph. Retrieved August 27, 2025, from
https://cointelegraph.com/news/yzy-token-bloodbath-sees-coordinated-snipers-extract-millions-from-kanye-fans
CoinCatch Team
Disclaimer:
Digital asset prices carry high market risk and price volatility. You should carefully consider your investment experience, financial situation, investment objectives, and risk tolerance. CoinCatch is not responsible for any losses that may occur. This article should not be considered financial advice.
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