Original author: ChandlerZ, Foresight News

On April 9, CoinDesk reported that the crypto project World Liberty Financial (WLFI), co-founded by the Trump family, has conducted multiple collateral 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, borrowing a total of about $75 million in stablecoins, of which over $40 million flowed to Coinbase Prime, suspected to be used for fiat exchange or over-the-counter trading.

Two months, five transactions, a complete funding chain

In specific operations, on February 8, WLFI's treasury deposited 14 million USD1 into Dolomite as collateral and borrowed 11.4 million USDC. Minutes later, 11.45 million USDC transferred to Coinbase Prime's deposit address. Coinbase Prime is typically used for cryptocurrency to fiat conversions or institutional OTC trading.

Two days later, WLFI transferred 12.5 million USD1 directly from the treasury to another Coinbase Prime address. This funding did not go through Dolomite for lending but was directly sent to fiat export.

On February 20, WLFI tokens were introduced. The treasury deposited 890 million WLFI into Dolomite, borrowing 20 million USD1. On March 24, an additional 1.1 billion WLFI was deposited. The total of both rounds of operations involved 1.99 billion WLFI locked as collateral in Dolomite, from which the treasury obtained approximately $31.4 million in stablecoins cumulatively.

In April, the scale further increased. On April 2, WLFI's 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 valued at approximately $266 million at current prices but did not directly enter Dolomite, and their whereabouts remain unclear.

Including all channels of lending and direct transfers, WLFI has cumulatively mobilized about $75 million in stablecoins through Dolomite and Coinbase Prime.

This choice of protocol is not coincidental; public information shows that Dolomite co-founder Corey Caplan also serves as an advisor to WLFI, and the lending platform "WLFI Markets" is built on the Dolomite protocol. In other words, WLFI has used its own tokens as collateral on a protocol created with the participation of its advisor, borrowing its own issued stablecoins.

In traditional finance, such related party transactions require disclosure and approval from independent directors. In this instance, these firewalls are almost nonexistent.

Depositors' liquidity is squeezed

WLFI currently accounts for about 55% of the supply liquidity of $458.9 million on the entire Dolomite platform, with a total platform supply of $835.7 million.

Specifically concerning the USD1 pool, of the $180 million supply, $167.5 million has already been borrowed, with a utilization rate of about 93%. Only approximately $12.5 million remains in available liquidity in the pool, making it difficult for large deposit users to fully withdraw their funds. The pool's utilization rate once reached 100%.

The supply interest rate for USD1 is 16.24%, and the borrowing rate is 9.18%. This set of rates reflects concentrated borrowing activities dominated by a single large borrower rather than widespread organic demand.

The risks at the collateral end are similarly prominent, with very limited market depth for WLFI tokens and daily trading volumes far below the collateral scale. If a severe price drop triggers Dolomite's liquidation mechanism, forced selling could crash token prices before collateral is unwound, resulting in bad debts that ordinary depositors who cannot exit currently will ultimately bear.

This is not the first time: from "Spy Prince" to sanctioned affiliations

Dolomite lending is just the latest link in the chain of WLFI's conflicts of interest.

According to The Wall Street Journal, relevant corporate documents and informed sources reveal that four days before Trump's inauguration, a confidant of a member of the Abu Dhabi royal family secretly signed an agreement with the Trump family to acquire 49% of the Trump family's crypto project World Liberty Financial for $500 million. The buyer will prepay half the amount, or $187 million, directly into the Trump family's entity.

This transaction was supported by Abu Dhabi Prince Sheikh Tahnoon bin Zayed Al Nahyan, who has been pushing for the United States to allow him access to strictly controlled AI chips, often referred to as the "Spy Prince." He is the brother of the UAE president and national security advisor and the leader of the country's largest sovereign wealth fund, managing over $1.3 trillion in assets.

Documents show that of the first $250 million investment from Aryam Investment, a company supported by Tahnoon, $187 million flowed to two entities under the Trump family, DT Marks DEFI LLC and DT Marks SC LLC. In addition to payments to the Witkoff family entity, another $31 million was channeled to entities linked to co-founders Zak Folkman and Chase Herro.

According to the agreement, Aryam will become the largest shareholder of World Liberty and the only known investor in the company apart from the founders. The agreement also arranged for two Aryam executives (who are also executives at Tahnoon's G42 company) to join the five-person board of World Liberty; at the time, board members included Eric Trump and Steve Witkoff's son Zach Witkoff.

Steve Witkoff's wealth surged 15% in 2025 to $2.3 billion, while it was estimated at $2 billion when he first started working for the government. WLFI is a major driving force, with the family accumulating at least $200 million from token sales and related transactions. However, according to disclosures by House Democrats, the federal ethics office has not signed Witkoff's financial disclosure documents for seven months.

Moreover, WLFI's stablecoin USD1 previously established a partnership with the Southeast Asian blockchain project AB DAO, which had connections with Cambodia's Prince Group. Its head, Chen Zhi, has been sanctioned by the U.S. and U.K. in November 2025 for large-scale cyber fraud allegations, with the U.S. Department of Justice seizing approximately $12.7 billion in Bitcoin during related operations. WLFI responded that it was unaware of past affiliations with AB DAO.

On February 23, USD1 briefly depegged, falling to $0.994, causing $270 million to flow out in panic. WLFI claimed to have faced a "coordinated attack," including a hack of their joint account X, hiring KOLs to spread panic, and short selling WLFI tokens, but has never provided any technical evidence.

On-chain data also shows that WLFI transferred approximately 3 billion tokens to multiple addresses at the beginning of April, with a nominal value of about $266 million, and their whereabouts remain unclear. With multiple controversies stacked, the current price of WLFI tokens has dropped to $0.0858, reaching its lowest point since launch.

WLFI's response: No risk of liquidation

On April 10, WLFI tweeted in response to market concerns regarding its lending positions in WLFI Markets, stating that WLFI is currently one of the largest suppliers and borrowers in WLFI Markets, borrowing stablecoins using WLFI as collateral, while maintaining no risk of liquidation; even with significant market fluctuations, additional collateral can be provided at any time.

In terms of data, WLFI disclosed that USD1 currently has an annualized income of about $159.5 million, and has repurchased approximately 435 million WLFI on the secondary market over the past 6 months, with a total amount of about $65.58 million. The project also indicated that a governance proposal will be presented next week to discuss unlocking early locked tokens and upgrading functions for USD1, including supporting gas-free transfers and adapting to AI payment infrastructure.

USD1 currently has a market capitalization of about $4.3 billion and ranks prominently in the stablecoin market. WLFI's response attempts to shift the narrative from "conflicts of interest" to "business growth," but does not answer how WLFI will ensure that ordinary depositors are not harmed under extreme market conditions as the largest borrower in the lending pool. When the co-founder of Dolomite is also an advisor to WLFI, who guarantees the independence of risk control for this protocol?

Currently, neither Dolomite nor WLFI has provided explanations regarding the governance processes for related party transactions.

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