Original author: ChandlerZ, Foresight News
On April 9th, CoinDesk reported that World Liberty Financial (WLFI), a crypto project co-founded by the Trump family, conducted multiple collateralized lending operations through the DeFi lending protocol Dolomite, raising market concerns about insider trading, circular financing, and liquidity risks. WLFI lent out approximately $75 million worth of stablecoins on Dolomite using approximately 5 billion WLFI tokens as collateral, with over $40 million of that going to Coinbase Prime, suspected of being used for fiat currency exchange or over-the-counter trading.
Two months, five transactions, a complete funding chain
In terms of specific operations, on February 8th, the WLFI treasury deposited 14 million USD1 into Dolomite as collateral, lending out 11.4 million USDC. Minutes later, 11.45 million USDC was transferred to a Coinbase Prime deposit address. Coinbase Prime is typically used for cryptocurrency-to-fiat currency exchange or institutional OTC trading.
Two days later, WLFI transferred another 12.5 million USD1 directly from its treasury to another Coinbase Prime address. This money did not go through Dolomite lending; instead, it was sent directly to fiat currency export using its own stablecoin.
On February 20th, the WLFI token was launched. The Treasury deposited 890 million WLFI into Dolomite and lent out 20 million USD1. On March 24th, another 1.1 billion WLFI were deposited. In total, 1.99 billion WLFI were locked in Dolomite as collateral, and the Treasury received approximately $31.4 million in stablecoins from the protocol.
In April, the scale was upgraded again. On April 2nd, the WLFI treasury transferred 2 billion WLFI to a Gnosis Safe proxy wallet (address 0x44a681DD); on April 7th, another 1 billion were transferred. These 3 billion tokens are worth approximately $266 million at the current price, but they did not directly enter Dolomite, and their whereabouts are still unclear.
Including lending and direct transfers through all channels, WLFI mobilized approximately $75 million in stablecoins through Dolomite and Coinbase Prime.
The choice of this protocol was not accidental. Public information shows that Corey Caplan, co-founder of Dolomite, also serves as an advisor to WLFI, and WLFI's lending platform, "WLFI Markets," is also built on the Dolomite protocol. In other words, WLFI borrowed its own stablecoins using its own issued tokens as collateral on a protocol created with the help of its advisors.
In traditional finance, such related-party transactions require information disclosure and independent director approval. In this case, however, these firewalls are virtually nonexistent.
Depositors' liquidity was squeezed
WLFI currently accounts for approximately 55% of the $458.9 million supply liquidity on the Dolomite platform, with a total supply of $835.7 million across the platform.
Specifically in the USD1 pool, of the $180 million supply, $167.5 million has been lent out, representing a utilization rate of approximately 93%. Only about $12.5 million in available liquidity remains in the pool, making it practically impossible for large depositors to withdraw their funds in full. The pool's utilization rate once reached 100%.
The USD1 supply rate is 16.24%, and the borrowing rate is 9.18%. This set of rates reflects concentrated lending activity dominated by a single large borrower, rather than broad organic demand.
The risks on the collateral side are equally prominent. The WLFI token market has extremely limited depth, with daily trading volume far below the collateral size. Once a sharp price drop triggers Dolomite's liquidation mechanism, a forced sell-off could drive the token price down before the collateral is released, and the resulting bad debts will ultimately be borne by ordinary depositors who are currently unable to withdraw their funds.
This is not the first time: from "spy chief" to sanctions-related issues.
Dolomite lending is just the latest link in WLFI's chain of conflicts of interest.
According to the Wall Street Journal, company documents and sources familiar with the matter revealed that four days before Trump's inauguration, a close associate of an Abu Dhabi royal family member secretly signed an agreement with the Trump family to acquire a 49% stake in the Trump family's crypto project, World Liberty Financial, for $500 million. The buyer will pay half the amount upfront, $187 million, directly into the Trump family entity.
The deal was backed by Abu Dhabi Prince Sheikh Tahnoon bin Zayed Al Nahyan, who has been pushing the U.S. to allow him access to tightly controlled artificial intelligence chips. Often referred to as the "spy prince," he is the brother of the UAE president and national security advisor, and also the head of the country's largest wealth fund, which manages more than $1.3 trillion in assets.
Documents show that of the initial $250 million investment by Aryam Investment 1, a company backed by Tahnoon, $187 million went to two entities owned by the Trump family: DT Marks DEFI LLC and DT Marks SC LLC. In addition to payments to entities related to the Witkoff family, another $31 million went to entities associated with co-founders Zak Folkman and Chase Herro.
Under the agreement, Aryam will become the largest shareholder of World Liberty and the only known investor besides the founders. The agreement also arranges for two Aryam executives (who are also executives of Tahnoon's G42 company) to join World Liberty's five-member board of directors, which at the time included Eric Trump and Zach Witkoff, son of Steve Witkoff.
Steve Witkoff's wealth surged 15% to $2.3 billion in 2025, compared to an estimated $2 billion when he first started working for the government. WLFI was a major driving force, with his family accumulating at least $200 million in profits from token sales and related transactions. However, according to House Democrats, the Office of Federal Ethics has not signed off on Witkoff's financial disclosures for seven months.
Furthermore, WLFI's stablecoin USD1 previously partnered with the Southeast Asian blockchain project AB DAO, which was linked to Cambodia's Prince Group. Prince Group's head, Chen Zhi, was sanctioned by the US and UK in November 2025 on charges of large-scale online fraud, with the US Department of Justice seizing approximately $12.7 billion worth of Bitcoin in the process. WLFI responded that it was unaware of any past connections to AB DAO.
On February 23, USD1 briefly fell to $0.994, with $270 million flowing out in panic. WLFI claimed to have been the victim of a "coordinated attack," including the hacking of the Lianchuang X account, hiring KOLs to spread panic, and short WLFI tokens, but has consistently failed to provide any technical evidence.
On-chain data also shows that WLFI transferred approximately 3 billion tokens, with a nominal value of about $266 million, to multiple addresses in early April; the destination remains unclear. Amidst these multiple controversies, the price of the WLFI token has currently fallen to $0.0858, its lowest level since its launch.
WLFI's response: There is no risk of liquidation.
On April 10, WLFI responded to market concerns about its lending positions on WLFI Markets, stating that WLFI is currently one of the largest suppliers and borrowers on WLFI Markets, borrowing stablecoins through WLFI as collateral, but there is no risk of liquidation, and additional collateral can be added at any time even if the market fluctuates significantly.
In terms of data, WLFI disclosed that USD1 currently generates approximately $159.5 million in annualized revenue. Over the past six months, it has repurchased approximately 435 million WLFI tokens on the secondary market, totaling approximately $65.58 million. The project also stated that it will submit a governance proposal next week to discuss unlocking early-locked tokens and upgrading USD1's functionality, including supporting gas-free transfers and adapting to AI payment infrastructure.
USD1 currently has a market capitalization of approximately $4.3 billion, ranking among the top stablecoins. WLFI's response attempted to shift the narrative from "conflict of interest" to "business growth," but it did not address how WLFI, as the largest borrower in the lending pool, ensures that ordinary depositors will not suffer losses under extreme market conditions. Furthermore, when the co-founder of Dolomite is also an advisor to WLFI, who guarantees the protocol's risk control independence?
Currently, neither Dolomite nor WLFI has provided any explanation regarding the governance process for related-party transactions.
