World Liberty Financial LLC has sued Tron founder Justin Sun in Miami-Dade County, accusing him of a coordinated smear campaign that contributed to a sharp decline in its WLFI governance token (WLFI).
The lawsuit, filed on 4 May, alleges Sun used his X account – followed by more than 4mn users – to label the project a "scandal" and a "sham" at a critical time, coinciding with intense selling pressure and a contentious governance proposal on over 62bn locked tokens.
The filing comes just days before Eric Trump, Donald Trump Jr., and Justin Sun are scheduled to speak at the Consensus conference in Miami, adding a high-profile dimension to the dispute between parties once seen as aligned in the crypto space.
Legal battle escalates
World Liberty Financial, a decentralized finance protocol that enables borrowing and lending of crypto assets against its USD1 stablecoin while using the WLFI token for governance decisions, claims the conflict arose after it uncovered alleged misconduct including prohibited straw purchases and aggressive short-selling by Sun-linked entities.
Court documents reference onchain movements on 31 Aug 2025, when wallets connected to Sun allegedly transferred $300mn in USDT to Binance shortly before WLFI public trading began. The project states it exercised a contractually disclosed right to freeze Sun’s roughly 4bn WLFI tokens to protect the protocol.
Sun, who invested tens of millions in WLFI and filed his own federal lawsuit against the firm in California in April, alleges the team secretly embedded a "backdoor blacklisting function" to seize investor assets. Sun did not immediately respond to requests for comment on the new Miami suit.
The latest action seeks compensatory and punitive damages, arguing Sun’s public statements, combined with the looming token unlock, drove WLFI to a fresh all-time low near $0.060 as of 13:30 UTC on 4 May. The token has underperformed many altcoins amid broader market volatility, with concerns over supply dynamics and transparency likely catalysts.
Token restructuring fuels volatility
A governance proposal to place 62.3bn tokens held by early investors and insiders under a new multi-year vesting schedule after a two-year cliff has emerged as the main catalyst for recent weakness. The plan includes a 10% burn of team allocations, yet participants who reject the new terms reportedly risk indefinite lockups, prompting "bait-and-switch" accusations.
The proposal triggered a 15% daily drop when voting opened. Additional pressure came from reports that World Liberty Financial sold 5.9bn tokens in private deals without full public disclosure. With about 80% of early allocations still locked, the restructuring has amplified fears of future supply overhang.
The core disagreement centres on whether World Liberty Financial had the contractual authority to implement the token freeze under the original purchase agreements and smart contract terms. The parallel cases in Miami-Dade County and California federal court will test the enforceability of such provisions in decentralized finance projects.
Potential regulatory spotlight
The feud arrives as World Liberty Financial, with its prominent Trump family connections, navigates a US regulatory environment increasingly focused on token sales, stablecoins and investor protections. Any court findings could draw attention from regulators examining disclosure practices and governance in Trump-linked crypto ventures.
WLFI launched in late 2025 with considerable hype tied to its association with the Trump family but has since faced questions about tokenomics and execution. The project positions itself as a bridge between traditional finance and onchain lending, though its token has traded well below initial highs.
