Justin Sun publicly blasted Trump-linked World Liberty Financial (WLFI) this week, accusing the project of treating crypto users like a “personal ATM” after a $75 million DeFi loan strained on-chain liquidity and temporarily locked ordinary depositors out of their funds.
What happened
- WLFI deposited 5 billion WLFI tokens as collateral on Dolomite and borrowed roughly $75 million in stablecoins. That single deposit now dominates Dolomite’s token supply metrics and sits within a platform that reports about $794 million in total supplied liquidity.
- The USD1 stablecoin pool on Dolomite briefly hit 100% utilization at the loan’s peak, meaning every available stablecoin was borrowed and ordinary depositors were temporarily unable to withdraw. By Sunday the pool’s utilization had eased to about 82% — roughly $158 million borrowed against $193 million supplied.
Why Sun is angry
- Sun — who has been an early and vocal backer of WLFI and says he invested heavily because he believed the project’s decentralized-finance vision — condemned WLFI’s fee extraction and borrowing strategy as “illegitimate.” He wrote that the team’s actions treat “the crypto community as a personal ATM” and said he and other investors oppose those moves “in the strongest possible terms.”
- He also accused WLFI of running an unfair governance process around controversial actions such as wallet freezes, saying votes “were not conducted through a fair or transparent process,” that key information was withheld, and outcomes were predetermined.
Governance and conflicts of interest
- Dolomite co-founder Corey Caplan also serves as an advisor to WLFI — a dual role on-chain observers have described as functionally akin to CTO. To make room for the WLFI deposit, Dolomite raised its WLFI supply cap to 5.1 billion tokens, a decision that critics say amplified the market impact of the collateralized loan.
Past disputes between Sun and WLFI
- Sun previously stepped in to stabilize WLFI by buying about $30 million in tokens after a tepid launch. Last September, however, WLFI froze Sun’s wallet, locking him out of 595 million unlocked tokens that were then valued at roughly $107 million. WLFI said the freeze targeted 272 wallets it linked to phishing attacks and compromised channels, saying the interventions were to protect users.
- Sun calls that freeze the project’s “original sin,” describing himself as “the first and single largest victim” of what he characterizes as wrongful blacklisting that violates investor rights and basic blockchain fairness.
Political context
- Sun made a point to separate his criticism of WLFI’s operators from the President, reaffirming that he is “an ardent supporter of President Trump and his crypto-friendly policy” and directing his denunciation at “the bad actors at WLFI.”
Market reaction and response
- WLFI co-founder Zak Folkman did not immediately respond to a CoinDesk request for comment sent via Telegram.
- WLFI’s token is trading around $0.079, down about 18% over the past week, according to CoinDesk data.
What this means
- The episode highlights the risks of concentrated collateral and close ties between projects and lending platforms, and it underscores how governance decisions and emergency interventions (like wallet freezes) can quickly erode investor confidence and on-chain liquidity.
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