Justin Sun Sues Trump-Backed World Liberty Financial Over Frozen WLFI Tokens

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Tron founder Justin Sun has filed a lawsuit in California federal court against World Liberty Financial, the Trump family-backed DeFi platform, alleging the project wrongfully froze roughly 544 million of his WLFI tokens, blocked him from participating in governance votes, and threatened to burn a portion of his holdings without justification.

Sun Targets Trump-Linked DeFi Project in Federal Court

Sun invested approximately $75 million in World Liberty Financial as one of its earliest and largest backers. World Liberty Financial provides lending, borrowing, and governance functions through its WLFI token and USD1 stablecoin. 

The conflict stems from World Liberty Financial’s decision to use billions of WLFI tokens as collateral on the Dolomite lending protocol to borrow approximately $75 million in stablecoins, with those funds reportedly recycled to support liquidity for the project’s USD1 stablecoin. 

The project characterized the transaction as a legitimate, over-collateralized, yield-generating strategy. Sun and other critics pointed to a potential conflict of interest: Dolomite’s leadership includes Corey Caplan, who serves as an advisor to World Liberty Financial.

On-chain data showed World Liberty Financial depositing significant WLFI volumes through the maneuver, contributing to price volatility. WLFI fell roughly 20% from a high of $0.10 on April 8 to a low of $0.077 on April 19 and was trading around $0.08 at 08:45 UTC on April 22.

Governance Proposal Adds Vesting Cliff and Burn Provision

On April 15, World Liberty Financial submitted a governance proposal addressing more than 62 billion previously locked WLFI tokens, outlining a move from indefinite lock-ups to structured vesting schedules. 

Under the plan, early supporters would face a two-year cliff before any tokens unlock, followed by a gradual release over the subsequent two years. Founders, team members, advisors, and partners would face a two-year cliff plus three additional years of linear vesting, but only if they accept the new terms. 

The proposal also includes a potential 10% burn, approximately 4.5 billion tokens, applied to certain insider allocations. Token holders who reject the terms risk having their holdings locked indefinitely.

Sun opposed the proposal and described it as coercive. He also alleged that his frozen tokens prevented him from casting a vote on it and that the team dismissed attempts to resolve the matter out of court. World Liberty Financial responded on X: 

“We have the truth. See you in court, pal.”

Centralization Allegations Raise Broader Token Holder Questions

Sun alleged that the protocol secretly introduced a backdoor blacklisting function into its smart contracts following an initial upgrade, enabling a single guardian account to freeze wallets. According to Arkham Intelligence, Sun currently holds 544 million WLFI tokens in the affected address. He further claimed that core protocol functions remain under the control of a 3-of-5 multi-signature arrangement with anonymous keyholders and called for full public disclosure of those identities.

The lawsuit adds to scrutiny of governance practices at crypto projects tied to political figures. The Trump family has disclosed that it previously received 75% of net proceeds from WLFI token sales, though disclosures indicate the family has been reducing its exposure over time. 

Sun, who settled a separate SEC fraud case in March for $10 million without admitting wrongdoing, says he is seeking treatment equivalent to that afforded other early investors.