Justin Sun claims that the stablecoin $USD1 from World Liberty Financial contains "backdoor functions" that could allow freezing or destroying user assets.
In a statement posted on X, Sun stated that his legal team successfully thwarted World Liberty Financial's attempt to move their dispute to private arbitration and close the related court cases from public view in a California federal court. According to Sun, the court ruled that all his personal lawsuits must still be handled in open court proceedings.
Sun claimed that during the process, he learned that World Liberty Financial's $USD1 stablecoin also has similar authorization mechanisms. Sun asserted that this technical structure gives World Liberty the ability to freeze or destroy user assets at any time.
In his statement, Sun also warned users of $USD1, claiming that such powers represent a significant counterparty risk, especially within centralized stablecoin structures. Sun also stated that World Liberty had previously been willing to use similar powers against WLFI token holders.
Another issue raised by Sun concerned the financial status of World Liberty Financial and $USD1. Sun emphasized that the collateral for $USD1's market capitalization, approximately $4 billion, belongs to the stablecoin's users, arguing that these reserves cannot be used to satisfy his potential claims, which could reach hundreds of millions of dollars, or other company obligations.
Sun stated that, apart from the $1 USD reserves, he saw no evidence that World Liberty Financial has sufficient capital to fulfill potential court judgments and other liabilities. Therefore, he urged investors to exercise "extreme caution."
World Liberty Financial has not yet issued an official statement regarding Justin Sun's recent accusations about the technical structure of $USD1 and the company's financial health. At this stage, Sun's statements remain merely accusations.
*This is not investment advice.
end-content
