Trump‑backed WLFI token dropped over 10% after the team defended a $75 million stablecoin loan deal that relied on WLFI as collateral, emptying Dolomite’s lending pool. The move is drawing scrutiny over both the price impact and the ethics of borrowing from a platform tied to its own advisor.
The World Liberty Financial team said it supplied 5 billion WLFI tokens, nominally valued at $440 million, as collateral and borrowed stablecoins to act as an anchor borrower on WLFI Markets. It also argued that there is “no liquidation risk” because it would simply supply more collateral. However, the deal left DeFi lending protocol Dolomite potentially exposed to bad debt because any instance of forced liquidation would probably crash WLFI’s thinly traded price.
Notably, the executed series of transactions raised questions about circular token economics, concentrated risk to other depositors, and insider access. On-chain records from Arkham and Etherscan show that transactions began on February 8. The company’s treasury deposited nearly $14 million in its USD1 stablecoin, pegged to the US dollar, into Dolomite as collateral to borrow 11.4 million USDC.
WLFI token continues to face downside pressure
As the situation escalates, the center of the issue is that WLFI is likely to face continued downside pressure unless key resistance levels are reclaimed. However, ongoing distribution, bearish indicators, and negative sentiment show that sellers remain in control.
Meanwhile, whether the anchor borrower strategy generates sustainable yield or concentrates system risk in a single insider position also remains another central question for depositors still locked in the pool. The borrowing pushed Dolomite’s USD1 pool utilization above 93%, making timely withdrawals difficult for ordinary depositors.
On the other hand, this issue arises alongside separate scrutiny after an investigation found that WLFI had integrated its USD1 stablecoin with a Southeast Asia blockchain project linked to a founder sanctioned by UK and U.S. authorities. The investigations also uncovered that WLFI’s advisor, Corey Caplan, is a co-founder at Dolomite.
Notably, a related-party transaction of this scale in traditional finance typically requires disclosure and independent board approval. However, WLFI has dismissed market concerns about its collateral position in Dolomite as FUD, despite the token losing nearly 17% weekly and up to 16% monthly.
WLFI transfers over $40M to Coinbase Prime
On-chain data also shows that the WLFI project sent more than $40 million of the $75 million loan directly to Coinbase Prime. The $40 million will typically be used for institutional OTC conversions. However, $15 million was subsequently repaid.
Meanwhile, Arkham’s data previously showed that WLFI moved 11.45 million USDC to a deposit address linked to Coinbase Prime. The project further sent another 12.5 million USD1 directly from its treasury to a separate Coinbase Prime deposit address. However, that 12.5 million USD1 was not part of the loan borrowed from Dolomite. That means WLFI sent its own stablecoin straight to a fiat off-ramp.
The World Liberty Finance treasury also previously deposited 890 million WLFI tokens into Dolomite and received a loan of 20 million USD1 against it. Another 1.1 billion WLFI followed almost a month later, bringing the total WLFI tokens sitting in Dolomite as collateral to 1.99 billion WLFI tokens. The project’s treasury received approximately 31.4 million in stablecoins from Dolomite across both instances.
Activity escalated in April through a different route when the treasury sent 2 billion WLFI to a Gnosis Safe proxy wallet address. It sent an additional 1 billion WLFI five days later.
However, neither transfer went directly to Dolomite, and on-chain data does not yet show where those tokens ended up. As of publication, the 3 billion WLFI tokens are worth approximately $266 million at the current price of $0.08195 per WLFI.
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Source: https://www.cryptopolitan.com/wlfi-token-dips-10-trumps-borrows-75-mil/
