Before Todd Blanche could be confirmed as the second-highest official at the Justice Department, he had to satisfy the concerns of ethics officials.
Blanche, President Donald Trump’s personal attorney during his New York criminal trial last year, was a cryptocurrency investor with holdings of between $159,000 and $485,000, records show.
To prevent possible violations of the federal conflicts of interest statute, Blanche promised to dump his digital assets no later than 90 days after his Senate confirmation in March, according to his government ethics agreement. He also pledged not to participate in any matter that could have a “direct and predictable effect on my financial interests in the virtual currency” until his Bitcoin and other crypto-related products were sold.
But about a month into the job — before divesting — Blanche issued a memo that ordered an end to investigations into crypto companies, dealers and exchanges launched during President Joe Biden’s term. He also eliminated an enforcement team dedicated to looking for crypto-related fraud and money-laundering schemes. And his memo said the Justice Department would assist Trump’s crypto working group of experts and Cabinet members that went on to issue a list of recommendations aimed at making the United States the global leader in digital coins.
Blanche’s directives, while he still owned significant crypto investments, violated the conflicts of interest law and his ethics agreement, legal experts and former federal ethics officials told ProPublica.
“If you are invested in that industry and now making a decision that could affect whether or not the DOJ is gonna pursue prosecutions, that’s an obvious conflict of interest,” said Virginia Canter, who served as an ethics lawyer at the White House, Treasury Department and Securities and Exchange Commission during the presidencies of George H.W. Bush, Bill Clinton, George W. Bush and Barack Obama.
Even when he did ultimately divest his crypto interests, Blanche’s ethics records show he did so by transferring them to his adult children and a grandchild, a move the experts said is technically legal but at odds with the spirit and intent of the law.
Blanche’s actions illustrate the ethical problems posed as the Trump administration relaxes regulation of digital money to make good on the president’s vow to make the U.S. “the crypto capital of the world.” In less than a year, Trump has nominated at least 216 political appointees who owned — either by themselves or with their spouses — cryptocurrency investments worth between $175 million and $340 million at the time of their nomination, a ProPublica review of federal financial disclosure records found. By contrast, in the first two years of his presidency, Biden appointed about two dozen people who, combined, held less than $7 million in crypto investments.
Trump’s crypto-friendly appointees include several who head agencies with regulatory authority over the industry.
Among them is Commerce Secretary Howard Lutnick. Until this year, Lutnick was CEO of Cantor Fitzgerald, a financial services firm with billions in crypto investments. The firm is also the primary banker for Tether, among the world’s largest issuers of stablecoins — a type of crypto pegged to the dollar or another asset to avoid wild swings in value.
After signing an ethics agreement, Lutnick transferred his stake in Cantor Fitzgerald to his children, including his two adult sons who now run the firm. The transfer was completed in October. By then, Lutnick had taken several pro-crypto steps — announcing that Trump would create a bitcoin strategic reserve, having his department take part in the president’s crypto working group and publishing economic data on nine key blockchains, a move designed to foster more trust in the digital market. (The blockchain is a digital ledger that underlies cryptocurrencies like Bitcoin.)
A Commerce Department spokesperson noted that Lutnick was given a limited waiver from the White House allowing him to work on general issues that could affect Cantor Fitzgerald while the transfer of his stake in the firm was pending. The waiver was dated July 8, nearly five months after he was sworn in. The spokesperson said Lutnick “fully complied with the terms of his ethics agreement” and did not have any “economic gains or losses associated” with the transfer of his stake in the firm.
Another crypto-friendly appointee is Paul Atkins, chair of the SEC, whose ethics records show he owned stakes of up to $6 million in crypto-related businesses before his confirmation in April. Since Trump took office, Atkins’ agency has dropped or settled enforcement cases with crypto companies.
Atkins signed an ethics agreement promising to sell a crypto investment fund and equity in two crypto companies. He has since filed paperwork saying he complied with the agreement and listed millions of dollars worth of investments he sold, but those do not mention any crypto-related sales. An SEC spokesman said Atkins complied with his ethics obligations but would not say when he sold his crypto-related assets.
A staffer for Blanche said he and the Justice Department would not comment.
Trump has led the way on ethical conflicts connected to crypto. During last year’s election campaign, he pledged to the crypto industry he would end Biden’s strict approach toward regulation. In turn, the industry heavily bet on Trump, spending millions to support his election and those of other Republican candidates.
On the eve of the election, Trump promised he would be America’s “crypto president” if he won a second term. He and his sons launched their own cryptocurrency business, World Liberty Financial, and after his election victory, Trump and his wife, Melania, issued a pair of meme coins, allowing anyone to use crypto to enrich the incoming president. Within days of taking office in January, Trump signed a presidential action promoting the growth of digital assets and started nominating government officials to fulfill his goal.
James Thurber, a former congressional staffer who worked on federal ethics reforms and is now professor emeritus at American University, characterized the Trump administration’s disregard of traditional government ethics as unprecedented. He contrasted Trump’s sale of crypto coins to the example set by President Jimmy Carter, who announced he was putting his peanut farm into a blind trust when he took office.
Thurber noted that Obama and Biden required their appointees to comply with an ethics pledge to avoid conflicts of interest. On the day of his inauguration in January, Trump rescinded Biden’s ethics pledge requirements for appointees.
“The conflicts of interest in this administration are blatant and hugely against the public interest.” Thurber said.
Trump’s press secretary, Karoline Leavitt, said in a statement to ProPublica that the “administration is fulfilling the President’s promise to make the United States the crypto capital of the world by driving innovation and economic opportunity for all Americans.”
“Neither the President nor his family have ever engaged, or will ever engage, in conflicts of interest,” she added.
Tonya Evans, a former professor at Penn State Dickinson Law who now consults on the digital economy, said the increase in crypto investors serving in the executive branch under Trump is a measure of the industry’s success in taking over regulatory bodies that were previously hostile to them. She compared the industry’s newfound power to how Goldman Sachs alums — such as Treasury Secretary Steven Mnuchin during Trump’s first term or Biden’s SEC chair, Gary Gensler — held prominent government positions and were able to exert outsized influence on shaping financial policy.
“My concern is not so much that people who understand crypto are in leadership positions,” she wrote in an email to ProPublica, “but that ethics frameworks may not yet meet this critical fork in the road of development, especially if ‘divestiture’ takes the form of passing to family. We are a long way from President Carter’s peanut farm!”
Crypto Conflicts
Blanche rose to prominence in recent years as Trump’s main defender in criminal court.
A former federal prosecutor for the Southern District of New York, Blanche, 51, was his lead attorney in the Manhattan trial that resulted in Trump being convicted of 34 felonies stemming from his hush-money payment to a pornographic actress, Stormy Daniels. Blanche also defended Trump against criminal charges accusing him of conspiring to subvert the 2020 election and retaining highly classified documents. (Those two cases were dropped after Trump was elected president.)
Since gaining Senate confirmation on March 5, Blanche has helped lead a massive remaking of the Department of Justice, shifting the emphasis from long-standing priorities, like the protection of civil rights. Thousands of employees have been terminated or resigned as the new administration ended police misconduct prosecutions, environmental abuse lawsuits and abortion access cases. Blanche has pushed for tougher border control enforcement and the use of fraud statutes to prosecute institutions with diversity-and-inclusion-related policies. As news of Trump’s ties to the disgraced financier Jeffrey Epstein gained momentum this year, it was Blanche who personally interviewed Ghislaine Maxwell, Epstein’s longtime confidante now serving a 20-year prison sentence for helping him sexually abuse underage girls.
When Blanche issued the sweeping memo ending the department’s Biden-era crypto enforcement approach, he effectively ended a three-year effort aimed at penetrating the shadowy world of transnational criminals.
The agency’s National Cryptocurrency Enforcement Team, as it was called, had won the conviction of a man who defrauded crypto investors out of $110 million; a guilty plea from a Russian man who processed more than $700 million through an online market place for drug trafficking, money laundering and other crimes; and the conviction of a cryptocurrency exchange operator that helped launder billions from hackers, ransomware attacks, identity theft schemes and narcotics distribution rings.
The team also assisted a multiagency probe of Binance, the world’s largest cryptocurrency exchange. The investigation found, among other things, that Binance failed to report and prevent suspicious financial transactions for Hamas, al-Qaida and other terrorist organizations. Federal prosecutors charged the company’s founder, Changpeng Zhao, with violating U.S. anti-money-laundering laws, and to settle the case, Zhao pleaded guilty, resigned as company chief executive and served a four-month prison sentence. He also agreed to pay the U.S. $4.3 billion in penalties. (Trump pardoned Zhao in October. Months earlier, Binance had used a stablecoin developed by the Trump-owned World Liberty Financial to fund a $2 billion deal.)
In his April 7 memo titled “Ending Regulation by Prosecution,” Blanche scoffed at the Biden Justice Department’s approach toward crypto, calling it “a reckless strategy of regulation by prosecution, which was ill conceived and poorly executed.” He said the agency would now target only the terrorists and drug traffickers who illicitly used crypto, not the platforms that hosted them. He announced the disbanding of the National Cryptocurrency Enforcement Team.
“The digital assets industry is critical to the Nation’s economic development and innovation,” Blanche wrote. “President Trump has also made clear that ‘[w]e are going to end the regulatory weaponization against digital assets.’”
The market reacted favorably; crypto trading spiked.
At the time, Blanche hadn’t relinquished his Bitcoin worth between $100,000 and $250,000, nor his investments in the cryptocurrencies Solana and Ethereum or his stock holdings in Coinbase. Blanche should have recused himself from the decision, experts told ProPublica.
Under the federal conflicts of interest statute, government officials are forbidden from taking part in a “particular matter” that can financially benefit them or their immediate family, unless they have a special waiver from the government. The penalties range from up to one year in jail or a civil fine of up to $50,000 all the way to as much as five years in prison if someone willfully violates the law.
Blanche’s wide-ranging memo benefited the industry broadly, including his own investments, ethics experts said.
In an ethics filing he electronically signed in June, Blanche said his Bitcoin and other cryptocurrency investments — including Solana, Cardano and Ethereum — “were gifted in their entirety to my grandchild and adult children.” Financial disclosure records don’t provide exact amounts but instead a broad range for the worth of a government official’s investment. At that point, Blanche’s records show his transfers to his family members were worth between $116,000 and $315,000. He said he sold additional crypto-related investments worth between $5,000 and $75,000. The divestment took place in late May and early June, the ethics filing said.
Legal experts noted that the federal conflict-of-interest law prohibits government officials from using their position in a way that would financially benefit a spouse or a minor child; it does not mention adult children or grandchildren.
Still, even if legal, giving assets like these to a relative doesn’t satisfy the ethical concern that a government official could act in a way that helps their family financially, they said.
“The purpose of the law is to eliminate even the appearance that an official’s decisions are influenced by their financial interests,” said Kedric Payne, a former deputy chief counsel for the Office of Congressional Ethics who is senior ethics director at the Campaign Legal Center. “That purpose is defeated when an official simply gives conflicted assets to adult children.”
