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Crypto firm that did a complicated deal with the Trumps warns it may face lawsuits and regulatory probes.

The Takeaway

Eric Trump and Donald Trump Jr. rang the bell at Nasdaq’s New York headquarters in August to celebrate the announcement of a deal that could have netted the family a windfall of hundreds of millions of dollars.

The president’s oldest sons were combining their crypto startup, World Liberty Financial, with a publicly traded Canadian company, Alt5 Sigma. “We’re going to change finance forever,” Eric Trump said at the ceremony.

At Alt5 Sigma’s offices in Montreal and Toronto, employees live streamed the flashy event. Alongside the Trump brothers were about two dozen people cheering the market open in front of a sign with the two companies’ logos. Missing from the scene were any representatives of Alt5 Sigma, even the CEO. A World Liberty spokesperson said: “other members of the Alt5 team were unable to attend.”

Troubles with the combined company quickly surfaced. Weeks later, Alt5 suspended its CEO pending the outcome of an investigation by a new outside law firm, and the company warned staff it would likely face litigation and regulatory investigations, according to a letter from the firm distributed to employees. Several other senior executives have quit or have been fired.

In the three months since, Alt5 Sigma’s shares have fallen 75% and the value of the Trumps’ crypto currency, $WLFI, has fallen by nearly half. The company also disclosed that it had been convicted of money laundering in Rwanda.

Alt5 told its staff on Sept. 4, without providing an explanation, about the suspension of its CEO. It didn’t publicly disclose the suspension until it posted a securities filing on Oct. 22.

The Trumps and World Liberty Financial wouldn’t comment on the share price declines or on Alt5 Sigma’s legal issues. The recent personnel changes at Alt5 Sigma “reflect an ongoing effort by Alt5’s leadership to ensure the company has an appropriate operating team in place,” the spokesperson said.

Alt5 Sigma investors are furious. “I feel betrayed,” said Matt Chipman, a Los Angeles–based shareholder in the company. He said he had been stonewalled in his efforts to find out why the deal happened and what the company’s plans are.

Trump Windfall

The Trump-Alt5 deal comprised two parts. Alt5 Sigma issued shares and warrants to World Liberty Financial in exchange for $750 million worth of $WLFI cryptocurrency created by the Trump family’s company. At the same time, Alt5 Sigma sold 100 million of its shares to other investors, raising $750 million. The company said it would use the money it raised to buy more $WLFI tokens on the open market.

The arrangement gave World Liberty Financial a public stock listing. The Trump family was aiming to profit from investor enthusiasm for digital asset treasury stocks—publicly traded companies whose sole purpose is to buy and hold crypto coins. The best known of these is Michael Saylor’s Strategy, whose shares soared after it loaded up on bitcoin.

Transactions like these are often done between private companies like World Liberty Financial and shell companies that have stock listings but no operating business. Alt5 Sigma did have an operating business, and troubles there are complicating the deal.

Founded by Canadian entrepreneurs in 2018, Alt5 Sigma built a trading platform and payment system that allowed customers to buy and sell crypto and to use digital coins to buy goods from e-commerce websites or gaming platforms. It processed roughly $1 billion worth of transactions in 2023, according to company records and people familiar with the figures.

As part of the deal, World Liberty co-founder Zach Witkoff—the son of President Donald Trump’s Middle East envoy, Steve Witkoff—was appointed Alt5’s chair. He said the deal would boost Alt5 Sigma’s original business by allowing it to issue cryptocurrencies that customers could use to make purchases.

“They were missing a big spotlight,” Witkoff said. “ALTS [the company’s Nasdaq ticker] is an incredible company with incredible technology. We’re really going to shine a light on that with this transaction.”

But Alt5’s bet on the Trump cryptocurrency turned out to be awful. The company’s stock is now more closely tied to the cryptocurrency than to its original business. Stocks that hold cryptocurrencies peaked in the summer and have tumbled since, with many falling by half or more. Alt5 Sigma’s market capitalization has sunk from around $700 million before the deal to below $200 million.

Chipman, the Alt5 Sigma investor, said he hopes the situation improves. “I hope it wasn’t just a money grab for the Trump family. This has been a nightmare scenario in the last three months,” he said.

Joining the Trump Orbit

Alt5 Sigma got its stock market listing last year through its merger with a biotech company, JanOne. The combined company named Canadian entrepreneur Peter Tassiopoulos as CEO.

Tassiopoulos steered Alt5 Sigma into the orbit of some conservative-leaning companies that have sprung up in recent years. In February, Alt5 Sigma struck an agreement to partner with Oklahoma-based Old Glory Bank, co-founded by Trump’s former secretary of housing and urban development, Ben Carson. The bank claims to be the “first chartered bank to openly support America, the flag, freedom, the military, first responders, and most importantly, the hard-working people who make America great.”

Old Glory raised fresh capital by selling shares in itself to small investors and allowing them to pay in crypto, including with a memecoin created by President Donald Trump. Alt5 Sigma provided the technology to support those transactions. Potential investors in the bank were “paying in Trump coin for their shares,” Tassiopoulos told an interviewer at a Dubai blockchain conference in February.

At Tassipoulos’ urging, the Alt5 board appointed a new director: Ron Pitters, a fintech executive who was previously head of securities and digital assets at Axos, a bank that became a big lender to Donald Trump after many other lenders cut him off following the 2020 election.

Earlier this year, the Trumps’ World Liberty Financial was searching for a partner to help it issue crypto-enabled credit and debit cards. Alt5 owned a subsidiary that could do just that. The two firms began discussing a possible project, former Alt5 employees said.

Those discussions didn’t pan out, but Tassiopoulos and the World Liberty team soon eyed a more adventurous opportunity: having Alt5 Sigma buy up the Trump’s cryptocurrency to join the burgeoning ranks of stocks that hold crypto. That led to the announcement at the Nasdaq.

World Liberty’s website says the Trump family owns 22.5 billion $WLFI tokens and is entitled to receive 75% of the proceeds from sales of the cryptocurrency. That implies the first part of the deal should have netted the Trumps roughly $550 million. The second part, Alt5 Sigma’s purchase of tokens on the open market, could have boosted the value of $WLFI. The cryptocurrency was priced at 20 cents per token on completion of the deal.

Since then, however, the price has dropped as low as 11 cents, likely reducing the Trump family’s gains. As of Tuesday, the token had recovered to 16 cents.

Alt5’s stock has also been on a roller coaster since the merger. Before the market opened the day of the announcement, it rallied from below $9 a share to just under $20 per share. When news hit that the company was selling shares at $7.50 each, the stock fell back to that price.

After the deal, a sense of unease swept over the roughly two dozen Alt5 employees, mainly based in Canada. Tassiopoulos offered differing accounts of the value of the World Liberty token and struggled to describe how it would draw investor interest, multiple former employees said. And while Alt5 historically held monthly companywide town hall meetings, Pitters informed staff that meetings would take place quarterly, putting the next one potentially in December.

In late August, Alt5 disclosed in a filing that, contrary to the plan, Eric Trump would no longer be taking a board seat. Nasdaq had warned the company that to comply with its listing rules regarding takeovers, Eric Trump would have to be designated as a board observer.

“Eric is not on the board, nor has he ever been on the board,” a Trump Organization spokesperson said.

Alt5 Sigma’s legal issues remain unclear. In the late August filing, the company said that the board had just learned about the Rwandan court decision that found Alt5 criminally liable for money laundering. The decision was handed down in May and the company appealed it in June, a person briefed on the matter said.

The filing said the Rwanda court decision and other matters “were not previously disclosed to the board” at the time of the World Liberty deal. The court matter related to a bank fraud perpetrated on the company by a fictitious money services business the company had partnered with in 2023.

Alt5 had alerted Rwandan authorities to the existence of the fictitious business in an attempt to retrieve the $3.5 million it had lost. Two former employees said documents related to the court case were available to World Liberty in a data room set up before the two firms made their deal. A World Liberty spokesperson said this was “categorically false.” (Data rooms are places where potential acquirers of a business can get access to detailed information about it.)

On Sept. 4, the company sent a memo to its staff saying that Tassiopoulos and Alt5’s chief revenue officer had been suspended pending the outcome of an investigation led by a special committee, according to an email viewed by The Information.

Alt5 didn’t publicly disclose the suspensions until it issued a securities filing on Oct. 22. It told shareholders that Tassiopoulos had been suspended on Oct. 16—six weeks after announcing it to employees. It is unclear if the special committee investigation is connected to the Rwandan conviction.

Law firm Thompson Hine sent a letter to employees on August 29 that said the special committee would investigate financial matters, asset transfers, payments, contracts and the company’s accounting, recordkeeping and preparation of financial statements, among other things. “Although no lawsuit has yet been filed against the company relating to the matters, litigation, regulatory investigations and other proceedings are reasonably anticipated,” the letter said.

The company declined to comment on legal matters.

Executives from Trump’s World Liberty were initially optimistic about the deal. Witkoff, Alt5 Sigma’s chair, said on a small podcast about blockchains in August that the company plans to acquire “a lot more” World Liberty tokens in the future. “You know, I think clearly it’s good for the ecosystem to have, you know, a major buyer that’s constantly in the market buying tokens and standing behind it,” he said.

Witkoff and the Trumps haven’t mentioned the combined company publicly since it hit the rocks.