Original Author: ChandlerZ, Foresight News
On April 9, CoinDesk reported that the crypto project World Liberty Financial (WLFI), co-founded by the Trump family, conducted multiple collateralized lending operations through the DeFi lending protocol Dolomite, sparking market concerns about insider relationships, circular financing, and liquidity risks. WLFI used approximately 5 billion WLFI tokens as collateral on the DeFi lending protocol Dolomite, cumulatively borrowing about $75 million in stablecoins, with over $40 million flowing to Coinbase Prime, suspected to be used for fiat currency exchange or over-the-counter (OTC) transactions.
Two Months, Five Transactions, One Complete Funding Chain
In specific operations, on February 8, the WLFI treasury deposited 14 million USD1 into Dolomite as collateral and borrowed 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 exchanges or institutional OTC transactions.
Two days later, WLFI transferred 12.5 million USD1 directly from the treasury to another Coinbase Prime address. This funds transfer did not go through Dolomite lending but instead sent its own issued stablecoin directly to a fiat exit.
On February 20, WLFI tokens made their appearance. The treasury deposited 890 million WLFI into Dolomite and borrowed 20 million USD1. On March 24, an additional 1.1 billion WLFI was deposited. Combined, these two rounds of operations locked 19.9 billion WLFI as collateral in Dolomite, and the treasury cumulatively obtained approximately $31.4 million in stablecoins from the protocol.
In April, the scale escalated again. On April 2, the WLFI treasury transferred 2 billion WLFI to a Gnosis Safe proxy wallet (address 0x44a681DD); on April 7, another 1 billion was transferred. These 3 billion tokens are worth approximately $266 million at current prices but were not directly deposited into Dolomite, and their whereabouts remain unclear.
Combining all channels of borrowing and direct transfers, WLFI has mobilized approximately $75 million in stablecoins through Dolomite and Coinbase Prime.
The choice of this protocol was not accidental. Public information shows that Dolomite co-founder Corey Caplan 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 used its own issued tokens as collateral on a protocol co-created by its advisor to borrow its own issued stablecoin.
In traditional finance, such related-party transactions require information disclosure and approval from the board of directors. In this case, these firewalls were almost non-existent.
Depositors' Liquidity is Squeezed
WLFI currently occupies about 55% of Dolomite's total platform supply liquidity of $458.9 million. The total platform supply is $835.7 million.
Specifically for the USD1 pool, out of a $180 million supply, $167.5 million has already been borrowed, representing a utilization rate of about 93%. Only about $12.5 million in available liquidity remains in the pool, making it difficult for large depositors to withdraw their funds in full. The utilization rate of this pool once reached 100%.
The USD1 supply interest rate is 16.24%, and the borrowing rate is 9.18%. This set of interest rates reflects concentrated lending activity dominated by a single large borrower, not broad organic demand.
Risks on the collateral side are equally prominent. The WLFI token has extremely limited market depth, with daily trading volume far below the collateral scale. If the price drops sharply and triggers Dolomite's liquidation mechanism, forced selling could crash the token price before the collateral is unwound, and the resulting bad debt would ultimately be borne by those ordinary depositors currently unable to exit.
This Is Not the First Time: From the 'Spy Prince' to Sanctions Associations
Dolomite lending is just the latest link in WLFI's chain of conflicts of interest.
According to The Wall Street Journal, related company documents and informed sources 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 would prepay half, $187 million, flowing directly into Trump family entities.
This transaction was supported by Abu Dhabi Prince Sheikh Tahnoon bin Zayed Al Nahyan, who has been pushing the U.S. to allow him access to tightly controlled AI chips. Often referred to as the "Spy Prince," he is the brother of the UAE President and National Security Advisor and also leads the country's largest sovereign wealth fund, managing over $1.3 trillion in assets.
Documents show that in the first $250 million investment by Tahnoon-backed company Aryam Investment 1, $187 million went to two Trump family entities: DT Marks DEFI LLC and DT Marks SC LLC. Besides payments to Witkoff family entities, another $31 million flowed to entities associated with co-founders Zak Folkman and Chase Herro.
According to the agreement, Aryam would become World Liberty's largest shareholder and the only known investor besides the founders. The agreement also arranged for two Aryam executives (who are also executives at Tahnoon's G42 company) to join World Liberty's five-person board, whose members at the time included Eric Trump and Steve Witkoff's son, Zach Witkoff.
Steve Witkoff's wealth surged by 15% in 2025 to $2.3 billion, up from an estimated $2 billion when he first started working for the government. WLFI was a major driver, with the family cumulatively profiting at least $200 million from token sales and related transactions. According to disclosures by House Democrats, the Office of Government Ethics had not signed off on Witkoff's financial disclosure forms for 7 months.
Furthermore, WLFI's stablecoin USD1 had previously established a partnership with the Southeast Asian blockchain project AB DAO, which was previously linked to Cambodia's Prince Group. The head of Prince Group, Chen Zhi, was sanctioned by the U.S. and UK in November 2025, involving charges of large-scale online fraud. The U.S. Department of Justice seized approximately $12.7 billion in Bitcoin in related actions. WLFI responded that it was unaware of AB DAO's past associations.
On February 23, USD1 briefly depegged, falling to $0.994, triggering a panic outflow of $270 million. WLFI claimed it was a "coordinated attack," including hacking of co-founders' X accounts, hiring KOLs to spread panic, and shorting WLFI tokens, but never provided any technical evidence.
On-chain data also shows that WLFI transferred approximately 3 billion tokens to multiple addresses in early April, with a nominal value of about $266 million, and their destination remains unclear. With multiple controversies叠加 (piling up), the WLFI token price has currently fallen to $0.0858, the lowest since its launch.
WLFI's Response: No Liquidation Risk
On April 10, WLFI tweeted in response to market质疑 (queries) regarding its lending positions on WLFI Markets, stating that WLFI is currently one of the largest suppliers and borrowers on WLFI Markets, borrowing stablecoins using WLFI as collateral, but there is no liquidation risk, and collateral can be added at any time even if the market fluctuates significantly.
Data-wise, WLFI disclosed that USD1's current annualized revenue is approximately $159.5 million, and it has repurchased about 435 million WLFI on the secondary market over the past 6 months, totaling approximately $65.58 million. The project also stated that it will propose a governance proposal next week to discuss unlocking early locked tokens and upgrading USD1's functionality, including support for gas-free transfers and adaptation to AI payment infrastructure.
USD1 currently has a market capitalization of approximately $4.3 billion, ranking high in the stablecoin market. WLFI's response attempts to shift the narrative from "conflicts of interest" to "business growth," but it does not answer how WLFI, as the largest borrower in the lending pool, ensures that ordinary depositors will not suffer losses under extreme market conditions? When Dolomite's co-founder is also a WLFI advisor, who guarantees the risk control independence of this protocol?
Currently, neither Dolomite nor WLFI has provided an explanation regarding the governance process for related-party transactions.
