Justin Sun Accuses World Liberty Financial of Hidden Token Freeze Backdoor Amid $175M Dispute

World Liberty Financial (WLFI) and Justin Sun are locked in a public dispute over alleged frozen tokens, misconduct claims, and a contract “backdoor” allegation. Sun, described as the project’s largest investor, accused WLFI of hiding a wallet-freeze function from investors. WLFI denied the claims and threatened legal action, while on-chain data has added visibility to parts of both sides’ activity and intensified scrutiny across the crypto community.

Sun alleges a hidden freeze function in WLFI token contract

Sun first invested $30 million in WLFI in late 2024. By January 2025, he scaled his position to $75 million and was named a project advisor. He also committed $100 million to the TRUMP memecoin, bringing his total exposure to roughly $175 million.

The WLFI token launched on September 1, 2025, at around $0.25 and later reached a high near $0.33. At launch, only 20% of presale tokens were unlocked.

Three days after launch, Sun moved approximately 50 million WLFI tokens to HTX, an exchange where he holds an advisory role. Around that time, HTX began offering WLFI presale investors high yields for depositing and locking their newly unlocked tokens.

WLFI alleges that Sun was selling tokens on the back end of his own exchange, including tokens tied to locked user balances. WLFI says the plan was to exit early by using retail users’ locked tokens as liquidity, then refill HTX user balances using future token vestings. WLFI claims it obtained logs supporting this account and froze Sun’s wallet on breach-of-agreement grounds.

Freeze size, timing, and governance claims

Sun’s public claims center on what he described as a hidden “backdoor blacklisting function” that allowed the team to freeze wallets. He described himself as “the first and single largest victim” of the alleged function.

The freeze, according to the dispute narrative, locked approximately 595 million unlocked tokens worth $107 million, along with billions more in vesting tokens. On-chain data cited in the article from Nansen indicated Sun’s wallet transfer occurred after the price dropped that day, not before.

Sun also alleged that governance votes used to justify the freeze had key information hidden from voters and that outcomes were predetermined.

WLFI treasury borrowing on Dolomite draws further scrutiny

Starting in February 2026, WLFI’s treasury began borrowing on Dolomite, a DeFi lending platform. WLFI deposited its own stablecoin and governance token as collateral, then borrowed real stablecoins against them.

By April 9, 2026, WLFI had deposited 5 billion tokens as collateral and borrowed around $75 million in stablecoins. Over $40 million of those funds were sent to Coinbase Prime, a platform commonly used for institutional fiat conversion.

Dolomite was co-founded by Corey Caplan, who is also described as a WLFI advisor and as acting in a CTO capacity. At that point, WLFI’s own token made up roughly 55% of Dolomite’s total liquidity.

During this period, the USD1 stablecoin pool on Dolomite reportedly reached 93% to 100% utilization, which WLFI critics said made it difficult for regular depositors to withdraw funds. The $40 million transfer to Coinbase Prime reportedly took place hours before a Trump US-Iran ceasefire announcement.

Responses from both sides and market reaction

WLFI responded to the criticism by calling it FUD. The project said the position was far from liquidation and described itself as an “anchor borrower” generating yield for other lenders on the platform.

On X, WLFI’s official account addressed Sun directly, stating: “See you in court pal.” Sun responded by demanding the team identify themselves publicly rather than operating behind an anonymous account.

At the time of writing, the Dolomite loan remained open, and the WLFI token was trading near $0.079, down 76% from its all-time high.