Investigation · Crypto Reality Check · July 2026

Is Crypto Really a System of Looting Money From Retail Investors? The $3.8 Billion Answer Nobody Wants to Hear

By Devesh Tiwari · 5 July 2026 · 9 min read

I’ve been writing about crypto for years now, and I’ve defended this industry more times than I can count. But this week, when President Trump’s 2025 financial disclosure landed and the blockchain data firm Nansen published its wallet analysis, I sat with the numbers for a long time.

Because the question my readers keep asking me — “Devesh, is crypto just a system to loot money from small investors?” — suddenly had a very concrete case study attached to it. Not a theory. Not a Reddit conspiracy. Official disclosure documents and on-chain data.

So today, let’s answer it honestly. No hype, no FUD. Just the mechanics.

First, the Facts — What Actually Happened

Three days before his second inauguration in January 2025, Donald Trump launched the $TRUMP memecoin. It rocketed from under $1 to over $75, hit a $15 billion market cap, and then did what almost every memecoin in history does — it collapsed. Today it trades below $2, down roughly 97% from its peak.

According to the latest official financial disclosure, here’s what the launch side of the trade looked like:

Meanwhile, on the buyer’s side: Nansen tracked 1.48 million wallets that purchased $TRUMP since launch. 988,905 of them — roughly two out of every three buyers — are sitting on losses totalling $3.81 billion.

If you’re wondering how big the individual damage got — one investor named Nicholas Pinto told the New York Times he put in around $500,000 and lost half of it. His words, not mine: “It is almost a legal scam.”

We actually covered the earlier phase of this story last month in our breakdown of how the Trump family’s crypto empire made billions while investors lost the same — the new July disclosure now confirms it with official numbers.

The Part Everyone Misses: How the Issuer Gets Paid Even When the Coin Dies

This is where the “looting” question gets its real answer. Most people assume that if a coin crashes, everyone who’s involved loses. That is completely wrong — and understanding why is the single most valuable piece of crypto education you’ll read this year.

Token creators don’t make money the way you do. You buy low and pray it goes higher. They earn from an entirely different pipe:

Notice what’s common in all four? The profit is front-loaded. It’s collected before, or independent of, whatever happens to the price. The crash you experience as a buyer is simply not part of the issuer’s business model.

There’s even a name for what late buyers become in this structure: exit liquidity. You’re not the customer of the product. You are the product — the fresh money that lets earlier participants leave with gains.

And the data proves it beautifully. Nansen found that roughly 500,000 wallets did profit from $TRUMP, banking a combined $4 billion. But those gains were “concentrated among buyers who bought the token in the first hours of the launch, when it traded under $1” — often automated trading bots, not humans reading a tweet. By the time you and I saw the coin trending, the smart money was already positioned to sell it to us.

“But Nobody Forced Them to Buy” — Let’s Take the Counterargument Seriously

Whenever I write pieces like this, someone in the comments says: “Retail investors gambled and lost. That’s on them.” And honestly? There’s a version of this argument worth respecting.

The $TRUMP website itself carried a disclaimer stating the token was “not intended to be, or to be the subject of, an investment opportunity.” Stock market IPO insiders and venture capitalists also profit far more than public shareholders. Early risk deserves early reward — that’s how markets work. And memecoins never pretended to have fundamentals. Nobody buying a joke coin at a $15 billion valuation can claim they were promised a dividend.

All fair. But here’s where the comparison breaks down:

In a stock IPO, insiders face lockup periods, disclosure requirements, insider trading laws, and an SEC that actually watches. In memecoins in 2026? The SEC announced in February 2025 that it would no longer scrutinize memecoin deals at all. Enforcement actions against crypto firms were dropped. The referee didn’t just miss the foul — the referee left the stadium.

So when the issuer promotes the coin to millions of followers (“GET YOUR $TRUMP NOW!”), controls 80% of supply, earns on every trade, and faces zero regulatory oversight — calling the outcome a “fair market” is a stretch. It’s not illegal looting. It’s something more uncomfortable: a system where extracting money from retail buyers is legal, structural, and repeatable.

It’s Not Just One Coin — Even Countries Play This Game Now

Want proof this is a system and not a one-off? Look at Pakistan.

In January 2026, Pakistan’s Finance Ministry signed an MoU with a World Liberty Financial affiliate to explore its USD1 stablecoin for remittances. Big ceremony. Prime Minister present. Army chief present. Six months later, Al Jazeera confirmed with Pakistani officials: no pilot project, no licenses issued, not a single known transaction.

Was the deal a failure then? Not at all — because remittances were never the real product. A Karachi-based economist put it bluntly: “The MoU was nothing more than an instrument of access… and it paid off spectacularly.” Pakistan got White House goodwill, a lunch invitation for its army chief, and a seat at the table during the US-Iran negotiations. A banking professional’s summary: “This whole exercise was pay for access.”

Think about what that means. The token didn’t need users. It didn’t need utility. Value still got extracted — just in political currency instead of dollars. When even governments treat crypto tokens as vehicles for something other than their stated purpose, retail buyers should ask themselves what purpose they’re serving in the transaction. (The UAE has been running a much smarter version of this playbook, which we analysed in why the UAE is quietly winning the global crypto race.)

So… Is All Crypto a Loot? My Honest Answer

No — and this distinction matters more than anything else in this article.

Bitcoin, for all its brutal volatility (it’s down over 50% from its October 2025 peak of $126,000 as I write this), has no issuer collecting royalties. No family holding 80% of supply. No licensing agreement paying someone $635 million while you hold the bag. It’s a commodity — you can lose money on it, but nobody is structurally positioned to profit from your loss. The same broadly applies to Ethereum and genuinely decentralized networks. If you want to understand what’s driving the current market-wide crash, we broke that down in why crypto is falling so fast right now.

The looting machine is specifically this category:

A finance professor quoted by Newsweek explained it through the “Greater Fool Theory” — you don’t invest in meme coins, you can only speculate that a bigger fool will buy from you later. The problem in 2026 is that the fools have run out, and the data shows exactly who was left holding the bag: retail. Almost a million wallets of retail.

How to Not Be Exit Liquidity — 5 Rules I Follow Myself

The Bottom Line

Is crypto a system of looting money from retail investors? The honest answer is: crypto is a technology, but the memecoin economy built on top of it has become the most efficient legal wealth-transfer machine from retail to insiders that markets have ever seen.

$1.4 billion in, $3.8 billion out. Front-loaded fees, controlled supply, zero oversight, and a million wallets of exit liquidity. That’s not a conspiracy theory — that’s a financial disclosure document and a blockchain ledger, both publicly readable.

The technology didn’t loot anyone. The structure did. And the structure only works on people who don’t understand it. Now you do.

Legal experts believe class-action lawsuits from losing investors may eventually come — one NYU law professor says he wouldn’t be surprised. Whether courts agree that a disclaimer on a website absolves a president promoting a token to millions of followers… that will be one of the defining crypto stories of this decade. We’ll be covering it.

Disclaimer: This article is for educational and informational purposes only and is not financial or legal advice. Figures cited are from public financial disclosures, Nansen blockchain analytics, and reporting by CNN, The New York Times, and Al Jazeera (July 2026). Cryptocurrency investments carry high risk. Please read our full disclaimer.