Sun Sues Trump-Linked WLFI Over Frozen Tokens, Voting Rights

In a 22 Apr post on X, Sun claimed the project froze his approximately 544mn WLFI tokens, stripped his ability to vote on proposals, and threatened to burn a portion of his holdings without justification. He stated he remains a strong supporter of President Trump and does not believe the president would endorse such actions.

Sun, who invested roughly $75mn in WLFI as one of the project's earliest and largest backers, described the move as a violation of his rights as a token holder. World Liberty Financial, which offers lending, borrowing and governance features through its WLFI token and USD1 stablecoin, did not immediately respond to Sandmark's request for comment. Tron also didn't immediately reply to an e-mailed message.

The lawsuit adds to growing scrutiny of high-profile crypto projects tied to political figures, where promises of decentralization often clash with centralized control mechanisms.

Self-collateralized loan fuels feud

The dispute originated from World Liberty Financial's decision to use billions of WLFI tokens as collateral on the Dolomite lending protocol to borrow approximately $75mn in stablecoins. Funds were reportedly recycled to support liquidity for the project's USD1 stablecoin.

The project defended the transaction as a legitimate yield-generating strategy, emphasizing that the loan was over-collateralized. Critics, including Sun, highlighted potential conflicts because Dolomite's leadership includes Corey Caplan, an advisor to World Liberty Financial.

Onchain activity showed World Liberty Financial depositing significant WLFI volumes, with the manoeuvre contributing to volatility. WLFI dropped roughly 20% from a high of $0.10 on 8 Apr to a low of $0.077 on 19 Apr. The token traded around $0.08 at 08:45UTC on 22 Apr.

Centralization, vesting concerns raised

Sun accused the protocol of secretly implementing a backdoor blacklisting function in its smart contracts after an initial upgrade, allowing a single guardian account to freeze wallets. He claimed core functions remain controlled by a 3-of-5 multi-signature setup with anonymous keyholders, and called for full disclosure of those identities.

In response, World Liberty Financial posted on X: "We have the truth. See you in court, pal."

On 15 Apr, the project submitted a governance proposal covering over 62bn previously locked WLFI tokens. The plan would move tokens from indefinite lock-ups to structured vesting schedules. Early supporters would face a two-year cliff – meaning no tokens unlock for the first two years – followed by gradual release over the next two years. Founders, team members, advisors and partners would face a two-year cliff plus three years of gradual linear vesting, but only if they accept the terms. The proposal also includes a potential 10% burn – roughly 4.5bn tokens – for certain insider allocations. Holders who reject the new terms risk having their tokens locked indefinitely.

Sun opposed the proposal, calling it coercive, and noted his frozen tokens prevented him from voting. He alleged the team dismissed out-of-court resolution attempts.

The Trump family has been reducing its exposure over time. Disclosures indicate the family previously received 75% of net proceeds from WLFI token sales.

Broader implications for DeFi governance

The case raises questions about token holder protections in DeFi projects, particularly when liquidity strategies intersect with vesting changes and governance controls. Sun settled a separate SEC fraud case in March for $10mn without admitting wrongdoing.

Industry observers note that such disputes can erode confidence among both retail and institutional crypto investors, especially in ventures linked to prominent names. The outcome may influence how future projects structure governance, transparency around multisig keys and dispute resolution mechanisms.

Sun maintains he seeks fair treatment equivalent to other early investors and continues to back the Trump administration's crypto-friendly stance.