WLFI Token Controversy: $5B Collateral Move, Withdrawal Crisis, and Justin Sun Blacklist Claim

TLDR:

• WLFI deposited $5B of its own token on Dolomite, borrowing $75M and sending $40M to Coinbase Prime.
• Dolomite’s utilization hit 100%, blocking ordinary depositors from withdrawing their stablecoins on the platform.
• Justin Sun alleged WLFI used a smart contract backdoor to blacklist his wallet, freezing $107M of his funds.
• Investor losses reached $3.87B across 600,000 wallets while related entities collected $350M in fees total.
  

World Liberty Financial (WLFI) is back at the center of crypto controversy following a series of financial moves that have raised serious questions about governance, transparency, and conflict of interest.

The token, currently trading at $0.07, has seen social activity surge sharply even as its price falls 18% this week and 67% from September highs.

With 600,000 wallets holding the token, losses now stand at $3.87B while related entities have collected $350M in fees.

Conflict of Interest Raises Questions Over WLFI’s Dolomite Transaction

WLFI deposited $5 billion worth of its own token as collateral on Dolomite, a DeFi lending protocol. Against that collateral, it borrowed $75 million in stablecoins. Shortly after, $40 million of those funds moved directly to Coinbase Prime.

The transaction structure drew immediate scrutiny due to the relationships involved. Dolomite was co-founded by Corey Caplan, who also holds an advisory role at World Liberty Financial. Essentially, the borrower had direct ties to the lender, the collateral, and the protocol itself.

When WLFI deposited the $5B in tokens, Dolomite’s utilization rate hit 100% almost immediately. That spike left ordinary depositors unable to withdraw their stablecoins, even though their balances appeared intact on paper.

This kind of arrangement has led many in the crypto community to question whether the transaction served the broader user base.

LunarCrush reported that social mentions, engagements, and crypto market share for WLFI are all climbing sharply, driven largely by these controversies.

Justin Sun Blacklist Claim Adds Another Layer to WLFI’s Growing Troubles

Beyond the Dolomite situation, WLFI now faces a separate and equally serious allegation. Justin Sun, founder of TRON, publicly claimed that WLFI blacklisted his wallet using a backdoor function embedded in the project’s smart contract.

According to Sun, this action froze approximately $107 million of his holdings without notice or recourse. The claim raised immediate concerns about centralized control within what was marketed as a decentralized finance project.

A backdoor function capable of freezing wallets runs counter to core DeFi principles. It suggests that specific parties may hold override authority over the protocol, which is not a standard feature in genuinely decentralized systems.

Meanwhile, WLFI’s circulating supply has reached 31.7 billion tokens. That growth in supply, combined with a price drop of 67% from its September peak, points to ongoing pressure on token value.

The Trump family and associated business entities have reportedly collected $350M in fees throughout this period, while investor losses have reached $3.87 billion across 600,000 wallets.

The post WLFI Token Controversy: $5B Collateral Move, Withdrawal Crisis, and Justin Sun Blacklist Claim appeared first on Blockonomi.