Defeated western North Carolina Congressman Madison Cawthorn this week reached what may be the humiliating finale to his brief and chaotic political career, as the bipartisan House Ethics Committee unanimously concluded that he had violated the Congressional Code of Conduct for participating in a “pump and dump” cryptocurrency scheme.
The Committee acted on a complaint filed seven months ago by North Carolina Republican Senator Thom Tillis, after Cawthorn publicly insulted Tillis and his wife by calling them RINOs, the pejorative for a “Republican in name only.” Tillis alleged that the 27-year-old Hendersonville Republican engaged in insider trading when he purchased cryptocurrency marketed as a “Let’s Go Brandon” coin — a line used by some Republicans as a substitute phrase for “Fuck Joe Biden.”
The investigative subcommittee of the Ethics Committee did not find sufficient evidence to support the insider trading accusation, but “also found that Representative Cawthorn’s purchase of the cryptocurrency was on more generous terms than were available to the general public, resulting in an improper gift,” the report said. The Committee “unanimously recommended that Representative Cawthorn be required to repay the value of the improper gift” —$14,237.49 — “to an appropriate charitable organization” plus a $1,000 penalty for the late filing of a required financial report.
Soon after his $150,000 investment, Cawthorn began actively promoting the cryptocurrency on Instagram to his right-wing political base, and saw its value rocket upward, an action called “pumping” by stock and currency traders. When the LGB coin reached its apex after rising more than 90 percent in value — the day before the cryptocurrency’s value began a near free fall — Cawthorn sold about a third of his holdings, the “dump” part of such a scheme. His gain on those shares, which he held for 10 days, was 93 percent, the House committee reported.
The Committee’s investigation “found substantial evidence that Representative Cawthorn promoted a cryptocurrency in which he had a financial interest in violation of rules protecting against conflicts of interest,” the 81-page report concluded.
Yet, in contrast to the critical language in the investigative subcommittee’s appendix to the Committee report, the penalties appear to be restrained. The Ethics Committee stated that the panel’s investigative subcommittee, on which the full committee relied, “could not come to consensus as to whether to recommend the Committee reprove Representative Cawthorn but intended for its Report to serve as an admonishment of Representative Cawthorn’s conduct.”
Most dictionaries list the verbs “reprove” and “admonish” as synonyms defined as mild forms of criticism.
“The Committee also determined that Representative Cawthorn’s conduct with respect to LGB Coin did not reflect creditably upon the House,” the report said. It added, “[A]s a Member of the House, Representative Cawthorn has a duty to protect the integrity of that institution, and his participation in promotional efforts for the cryptocurrency he owned was inconsistent with that duty.”
No Action on Sexual Misconduct Charge
In the complaint, Tillis also alleged that Cawthorn was guilty of nepotism and sexual misconduct because of his seemingly intimate relationship with his cousin, Stephen Smith, who also served on Cawthorn’s staff as an aide. Cawthorn and Smith had been depicted in social-media photos and videos engaging in “explicit and sexually suggestive comments and conduct,” according to the report. The pictures and videos were leaked to the news media, including Asheville Watchdog, earlier this year and may have contributed to Cawthorn’s reelection defeat in the May 17 Republican primary.
In interviews with Committee investigators, Cawthorn and Smith denied any improprieties. Cawthorn described the sexually suggestive conduct as “just stupid locker-room talk between two cousins who grew up like brothers, taken long before I served in Congress.”
The Committee concluded that there were insufficient grounds for it to act on either of the allegations. The Committee noted that federal law defines nepotism as hiring a relative closer than a first cousin. Smith is a second cousin.
The investigation also found no evidence that Smith, as an employee of the House, had been given favorable treatment by Cawthorn in comparison to other staff.
As for alleged inappropriate sexual relationship, the Committee concluded that, whatever its nature, it occurred prior to Cawthorn’s 2020 election and thus “is beyond the Committee’s jurisdiction.”
“While some photographs and videos published in the media were indicative of improper conduct if by a Member of Congress with a staffer, the ISC [investigative subcommittee] determined during its review that the vast majority of videos and photographs depicting potentially intimate, sexual, or crass comments or conduct involving Representative Cawthorn and [Smith] were from prior to Representative Cawthorn’s election to Congress and beyond the ISC’s jurisdiction.”
“Pump This Up So Much”
But the ISC, which included two Democrats and two Republicans, found wrongdoing in Cawthorn’s cryptocurrency investments. The subcommittee report, attached as an appendix to the Committee’s report, added fresh detail to the public’s knowledge of his involvement with the volatile cryptocurrency market.
“Representative Cawthorn improperly promoted a cryptocurrency in which he had a financial interest,” the subcommittee reported, adding that the subcommittee members were “particularly concerned by the fact that Representative Cawthorn did not appear in just one or two photographs related to LGB Coin, but in a series of photographs and videos of the course of several months following his investment in LGB Coin.”
In his interview with the investigators, Cawthorn said his promotion of the crypto coin was “more of a jab at [his] political rival.” The subcommittee members countered that claim in its report, noting citing a text message by Cawthorn to the creator of the LGB Coin, James Koutoulas, to “pump this up so much.”
The report traces the beginning of Cawthorn’s engagement in the venture to a Christmas party hosted by former president Donald Trump at his Palm Beach estate, Mar-a-Lago, where Cawthorn met Koutoulas, a currency trader and GOP donor, whom the report identified as Witness 1. Koutoulas had created the crypto coin to try to capitalize on the right wing’s antipathy to President Biden as exemplified in the “Let’s Go Brandon” line.
The line evolved from an October 2021 NASCAR race when fans began chanting “Fuck Joe Biden.” But a racetrack announcer interviewing NASCAR driver Brandon Brown at the time misheard the words and told the audience that the crowd was cheering “Let’s Go Brandon.” The phrase quickly became a political slogan on conservative media and the internet as cover for insulting the President.
Koutoulas created the cybercurrency with the plan to sell it to anti-Biden, NASCAR-loving investors. The so-called LGB Coin has no value as currency, but can gain value akin to the way such collectors’ items as vintage baseball cards do. Koutoulas, investigators said, believed that the LGB Coin would win NASCAR’s approval to be an official sponsor of Brown’s racing team. An announcement of the deal was to be made on Jan. 4, 2022.
According to the investigative report, Koutoulas broached his plan to Cawthorn on Dec. 21, 2021, the day after the Trump party, including informing him of the impending NASCAR sponsorship. Cawthorn immediately expressed his interest in investing and promised Koutoulas a check for $150,000, the report said. For that sum, he received 180 billion LGB Coin.
The next day, Cawthorn texted Koutoulas: “Excited to announce that I bought some LGB!” And in a second text, added: “So excited man! Let’s pump this up so much and be friends for another couple decades!”
To his followers on Instagram, Cawthorn posted: “Im [sic] on this train!” along with a link to the website where his followers could purchase the cryptocurrency. And in another exchange with Koutoulas, Cawthorn posted on Instagram, “tomorrow we go to the moon,” a reference to the impending public announcement about the expected sponsorship deal with NASCAR and the Brandon Brown team. “Representative Cawthorn testified he understood the phrase ‘tomorrow we go to the moon’ to mean an increase in value,” the report said.
The announcement was made Dec. 30 and trading for LGB Coin soared to its record high. The next day, according to the subcommittee investigation, Cawthorn cashed in more than a third of his original stake, nearly 66 billion LGB Coin, earning a 93 percent return on his investment. That was just 10 days after the purchase.
But four days later NASCAR did a U-turn, revoking its tentative approval of LGB Coin as an official sponsor for Brown’s No. 68 racecar. That same day, Cawthorn unloaded another big chunk of his holdings — about 35 billion LGB Coin — but for only a 15 percent return as the value of the coins plummeted.
Two weeks later he sold most of what he had left — some 62 billion — for a 46 percent loss below the purchase price.
The Ethics Committee has calculated that, at the time of the report’s writing, Cawthorn still held more than 15 billion LGB Coin, with a total market value of about $31.
“Members must at all times avoid even the appearance that they are monetizing their public role for personal gain,” the Committee report states. “Thus, as a general matter, Members should not be actively involved in personally selling or endorsing goods or services in which the Member or the Member’s family has a financial interest.”
Asheville Watchdog is a nonprofit news team producing stories that matter to Asheville and Buncombe County. Tom Fiedler is a Pulitzer Prize-winning political reporter and former executive editor of The Miami Herald. He lives in Asheville. Email firstname.lastname@example.org.