Friday Frivolity: A Use for Meme Coins?

As dedicated readers may recall, we posted last November about parody newspaper The Onion’s attempt to buy Alex Jones’ Infowars in an auction held in connection with Mr. Jones’ bankruptcy. That bankruptcy followed a $1.4 billion judgment against Mr. Jones in a suit brought by the families of victims of the mass shooting at the Sandy Hook Elementary School. Mr Jones promoted the theory that the event was a fabrication, and he defamed the families whose children had been killed as purveyors of a complex ruse designed to create anti-gun hysteria.

The idea behind The Onion’s purchase of the website and news source, previously devoted to crank, right-wing conspiracy theories, would be to run Infowars in a manner consistent with the wishes of the families who won the judgment that led to Mr. Jones’ bankruptcy. In short, Infowars would now promote the reasonable regulation of firearms. Alas, as  Geoff Weiss and Meghan Morris reported in The Business Insider,  the judge overseeing Mr. Jones’ bankruptcy proceedings would not enforce the results of the auction. There were improprieties with the original auction. However, as Tovia Smith reports for National Public Radio, the Bankruptcy judge also decided not to proceed with a new and improved auction, because Infowars' parent company is no longer in bankruptcy. An auction can proceed on the sale of Mr. Jones’ stake in that company. However, the judge cautioned, "If there's going to be a sale of assets, cash will be king."

Image  by Coingecko - Own work, CC0, 

Enter a highly atypical knight in shining armor: a meme coin may save the day. As Matt Levine reported in his “Money Stuff” column for Bloomberg back in February, an entity called WOW.AI is planning to bid on Mr. Jones’ stake, putting up $3.5 million plus a 51% stake in the $WARS meme coin. In order to establish a valuation for the coin, WOW.AI will sell 10% of the $WARS supply, and Matt Levine says that the trade in the available meme coins suggests that the value of the 51% stake in the coin will be around $11 million, well in excess of the $8 million bid put forward by Alex Jones himself (through his backers). The idea is that the 51% stake in the coin will then be transferred to the plaintiffs who put Mr. Jones in bankruptcy, and they can use their majority interest in the coin to dictate the direction that Infowars takes from here. 

It is a brilliant strategy. Matt Levine explains why. In the olden days, you could have financed this venture through launching a company, but then people would ask questions, like how does this venture make money? But with a memecoin, everybody knows that there is no value underlying the venture other than hype (see chart at left, which illustrates the price curve of a typical memecoin). In this case, there actually might be some value, depending on what happens with Infowars after the takeover. In addition, if the venture involved selling shares in a company, the SEC would definitely ask questions, because you are offering federally regulated securities. In short, Matt Levine concludes, "Crypto is a way to issue securities (stock) without following securities laws. (Not legal advice!)"