A controversial crypto move tied to Donald Trump is raising serious questions across the digital finance world after a $75 million borrowing maneuver left investors locked out of their own funds.
The project, World Liberty Financial, a Trump family–backed crypto venture, allegedly used 5 billion of its own WLFI tokens as collateral to borrow tens of millions in stablecoins. The funds were then routed to Coinbase Prime accounts, commonly used for large institutional trades.
At first glance, it looks like a standard DeFi loan. But critics say the structure tells a very different story.
According to on-chain data, the borrowing took place through Dolomite, a decentralized lending platform that just so happens to have ties to a World Liberty Financial adviser. That connection is now fueling accusations of insider advantage and circular financing.
Here is where things get messy.
By depositing massive amounts of WLFI, a token with relatively low market liquidity, the project was able to unlock stablecoin loans backed by its own ecosystem.
That move reportedly pushed Dolomite’s USD1 lending pool to near 100% utilization, meaning regular users who deposited funds into the pool suddenly could not withdraw their money.
In simple terms, one giant borrower may have drained the system.
Even more concerning is the risk tied to the collateral itself. WLFI’s price has already dropped nearly 10% to record lows, and if it falls further, forced liquidations could trigger a chain reaction.
Because the token is thinly traded, any large sell-off could crash its value instantly, leaving the platform with bad debt.
That risk would not hit insiders first. It would hit everyday depositors.
The numbers are staggering. Nearly $460 million worth of WLFI now sits inside the protocol, accounting for more than half of its total liquidity.
Meanwhile, additional billions of WLFI tokens have been moved to separate wallets, raising further questions about where the funds are headed next.
Critics are calling it a case of “circular economics”, where a project borrows against itself using user-funded pools to fuel its own operations.
World Liberty Financial has not publicly responded to the concerns.
But one thing is clear. In the fast-moving world of crypto, this kind of high-stakes maneuver is exactly what keeps regulators, investors, and critics on edge.