World Liberty's Sticky Situation

President Trump's World Liberty Financial has long been the subject of private crypto community grumblings, but in recent weeks the DeFi platform has increasingly found itself the topic of widespread open criticism.

The project founded by the Trump family and the sons of his chief Middle Eastern envoy Steve Witkoff had long drawn broader critiques outside the crypto industry over thorny conflicts of interest and bribery concerns. But in recent weeks, the platform's opaque governance moves and "bad taste" growth tactics are riling up users inside the industry, who are increasingly sounding the alarm on the decisions being made atop one of the Trump Organization's most profitable business ventures of all time.

Dolomite Drama

Last week, World Liberty Financial was thrust into the spotlight after executing a series of massive borrows through onchain lending market Dolomite – whose founder also serves as the World Liberty Financial's Chief Technical Officer – using its WLFI token as collateral to cash out more than $40M in stablecoins via Coinbase.

Alongside the cash withdrawals, the World Liberty Financial team deployed a stablecoin looping strategy designed to inflate the supply of its USD1 stablecoin by borrowing USDC against WLFI, swapping it into USD1, then recursively borrowing against that USD1 to repeat the cycle.

While many within the crypto industry voiced concern about the size of this borrow position (representing ~5% of the total WLFI supply) and potential contagion effects for lenders, noting that amount of WLFI could not possibly be liquidated without producing bad debt for lenders, World Liberty Financial summarily rejected such concerns as FUD.

Posting to X, the team said its borrow position is, "nowhere near liquidation — and frankly, even if markets moved dramatically against us, we'd simply supply more collateral."

These increasingly aggressive borrows coincided with a renewed WLFI rewards campaign, which attracted even more lenders to supply stablecoins in Dolomite against WLFI collateral with the promise of above-market yields from temporary rewards.

Although it is both true that World Liberty Financial's borrow position is healthily overcollateralized, with a liquidation level approximately 75% below current market prices (assuming the value of its looped USD1 stablecoin position holds constant), and even in that case the team is able to simply deposit more margin, the fact remains that onchain WLFI liquidity is limited and Dolomite is subjecting their users to heightened risk.

According to an analysis by crypto risk manager Chaos Labs, World Liberty financial accounts for 82.7% of total TVL supplied to lending market Dolomite and 85.3% of total assets borrowed. Should the value of WLFI tokens suddenly collapse (an admittedly unlikely scenario), forcing Dolomite to liquidate World Liberty Financial's collateral, lenders to Dolomite's USDC and USD1 markets stand to recover only a fraction of their capital.

Absent a full liquidation, borrower behavior still poses risk: a rush for the exits could cause market utilization to reach 100%, draining idle cash reserves and preventing further lender withdrawals altogether, even if World Liberty continues posting collateral and successfully avoiding liquidation.

Trump-Backed World Liberty Financial Defends Immense Borrow Position on Bankless

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Justin Sun vs. Trump

In an attempt to mitigate rising backlash over World Liberty Financial’s monetization of its tokens while regular holders remained locked, the WLFI team said on April 9 that it would submit a governance proposal to gradually unlock tokens for retail purchasers under a vesting schedule.

These half measures, however, fell flat within the community, prompting WLFI’s most adamant public supporter – crypto billionaire Justin Sun – to revolt just days later. Sun, who invested $75M into World Liberty Financial pre-launch and separately committed $100M to purchasing the TRUMP memecoin in 2025, settled charges for unregistered securities offerings and fraudulent price manipulation with President Trump’s SEC just weeks ago.

On April 12, Sun posted a scathing rebuke of World Liberty Financial, in which he voiced disdain for the WLFI token’s “backdoor blacklisting function,” which gives its issuer, “unilateral power to freeze, restrict, and effectively confiscate the property rights of any token holder, without notice, without cause, and without recourse.”

According to analysis by anon researcher banteg, the original WLFI token contract deployed in September 2024 had no token blacklist or seizure functionality, but was upgradable. Subsequently, a blacklist feature was added in August 2025, 11 months after Sun invested into the project and just a week before the token began trading.

The World Liberty Financial team exercised its newly established powers to block Sun from transferring WLFI tokens out of his wallet, leaving him frustrated as the terms of his investment were effectively changed without notice after he had already committed capital.

While seasoned crypto participants should understand the risks of upgradeable contracts versus immutable ones, Sun argues that World Liberty Financial marketed its initial token sale with one set of rules, then quietly upgraded the contract to grant itself unilateral freeze powers, before enforcing a token freeze against Sun once he began moving WLFI.

It’s a familiar nightmare for crypto investors, where upgradeable contracts, undisclosed admin privileges, and selective enforcement culminate in a loss of control over one’s own assets.

Sun continued on his tirade, denouncing “Every action taken by the WLFI team to extract fees from users, to secretly implant backdoor controls over user assets, to freeze investor funds without disclosure or due process, and to treat the crypto community as a personal ATM.”

World Liberty Financial subsequently escalated the dispute with Sun, threatening legal action against the crypto billionaire and accusing him of, “playing the victim while making baseless allegations to cover up his own misconduct.”

More Scrutiny Needed

World Liberty Financial is one of Trump's most profitable business moves of all time, with his company banking hundreds of millions of dollars in profit so far.

Politics aside, Trump's tactics to monetize his crypto popularity have raised plenty of eyebrows over the past year within the industry, though you wouldn't know that from listening to public comments from crypto's top CEOs and VCs who have kept critiques of his personal business ventures largely private.

But 15 months into his presidency – as one of its loudest investors goes to war with the team, and the community points to risky onchain behavior elsewhere raising red flags – it's apparent that World Liberty Financial deserves deeper and more open scrutiny.