A near-full lending pool and allegations of a hidden “kill switch” have thrust World Liberty Financial (WLFI) — the crypto project tied to U.S. President Donald Trump — into fresh controversy after one of its biggest backers went public with a blistering charge.
Justin Sun, founder of Tron and an early WLFI investor who says he put in more than $100 million across two rounds, posted on X on April 12, 2026, that WLFI built a secret control into its smart contracts. According to Sun, that mechanism can freeze, restrict, or block user funds — a move he called the “opposite” of decentralized finance. Sun added that his own wallet was blacklisted in 2025, which he says made him WLFI’s first and largest victim. WLFI has not issued a formal public response to the claims.
On-chain analytics firm Arkham Intelligence has also flagged risky balance-sheet behavior. Arkham says WLFI deposited roughly 2 billion of its own tokens into the Dolomite lending protocol and borrowed more than $31 million in stablecoins against them. That activity now represents about 55% of Dolomite’s liquidity, concentrating risk on the platform.
Additional transactions paint a similar picture of heavy internal token use to source outside liquidity:
- In February, WLFI posted $14 million worth of its own stablecoin, USD1, as collateral to borrow $11.4 million USDC.
- Another $12.5 million in USD1 was transferred straight to Coinbase Prime, circumventing lending markets.
- On-chain records indicate WLFI moved roughly 5 billion of its self-issued tokens overall to tap about $75 million in external liquidity — a structure critics liken to circular financing.
The market reaction has been swift. WLFI’s token has fallen below $0.08 and lost more than 20% over the past 30 days. With the USD1 lending pool running at about 93% utilization, exits are tightening and users seeking withdrawals may face increasingly constrained options. Reports also show about 3 billion WLFI tokens were transferred in the first week of April, stoking further concern.
Sun closed his public statement with a demand for the team to “unlock the tokens” and operate transparently. For now, questions about governance, centralized controls in supposedly decentralized code, and the broader systemic risk posed to lending venues like Dolomite remain unanswered. Whether WLFI will publicly address the allegations — or act on Sun’s demands — is yet to be seen.
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