World Liberty Financial (WLFI), a crypto project associated with the Donald Trump family, is involved in an escalating controversy. The team pledged approximately 5 billion of its own tokens to borrow approximately $75 million in stablecoins. Crypto critics say that this structure resembles circular financing.
Onchain data indicates that WLFI transacted with self issued assets on numerous occasions to open up the liquidity of the Dolomite lending protocol. The project borrowed 11.4 million USDC and deposited 14 million USD1, its in house stablecoin, in early February. The team immediately moved the borrowed funds to Coinbase Prime to execute institutional trades or convert into fiat.
Trump’s World Liberty Financial Faces Scam Allegations
Due to controversy around such borrowing activities, the WLFI token witnessed a decline in price. The altcoin lost hold over the $0.8 level. On the other hand, the crypto market recovered as Bitcoin price surged above the $72,000 level as US-Iran ceasefire talks continued.
An additional 12.5 million USD1 was distributed directly through the treasury of WLFI to Coinbase Prime days later, bypassing the lending process altogether. The process sparked concerns on how internally issued assets are being monetized.
In late February and March, the plan’s execution intensified. WLFI deposited 1.99 billion tokens into Dolomite and borrowed 31.4 million in stablecoins across transactions, per Arkham Intelligence data. These transactions are part of the larger estimate of approximately $75 million borrowed with self controlled collateral.
It is the structure itself that is subject to controversy. Critics claim that WLFI is literally minting or collateralizing its own tokens, and redeeming them in widely recognized stablecoin. The move hints at what netizens describe as a “closed loop” system with real world cash off-ramps.
Criticism centers on the use of self-issued tokens as collateral. Polymarket ambassador “StarPlatinum” described the model as one that’s “milking crypto.” He highlighted uncanny points, including $550 million WLFI token sale, insider control of 22.5% of supply, and founder-held tokens valued at approximately $3.8 billion.
The same post also highlighted past Trump-linked crypto ventures, including memecoins and NFTs. It spotlighted $1.2-1.4 billion in realized revenue alongside billions more in unrealized token profits. He noted that the project has achieved “max extraction” from the crypto market via this strategy.
WLFI Price Plunges 21% Amid the Controversy
The issue has further gained traction owing to the fact that WLFI dominates Dolomite. The Trump-linked project supplies approximately $458.9 million in assets, which is 55% of the protocol’s $835.7 million total liquidity.
The WLFI crypto price plunged to a low at $0.07714, marking a decline of over 10% after the controversy. Moreover, the losses in the 30-day period soared to more than 21%.
In the meantime, the USD1 pool is strained. It has a utilization of about 93% with a supply of 180 million and a $167.5 million borrowing. At that level, most funds are already lent out. It raises the risk that smaller depositors may face delays withdrawing funds if large positions remain open.
Adding to the controversy, WLFI moved 3 billion more tokens, worth about $266 million, to a different wallet in April. However, the destination wallet has yet not been identified.
Source: https://coingape.com/is-trumps-wlfi-a-scam-5b-self-collateral-75m-borrowing-stir-controversy/