WLFI vs Justin Sun: Public Dispute Sparks Legal Warning

Justin Sun and WLFI clash publicly over smart contract claims, legal threats, and rising borrowing risks on Dolomite platform.

A public dispute between Justin Sun and World Liberty Financial has intensified rapidly. The fight began on X with harsh words and legal threats. There was a lot of rhetoric between the two parties. As a result, the scenario has caused alarm in the crypto market and among international investors.

Justin Sun Accuses WLFI of Hidden Smart Contract Backdoor

First, Justin Sun alleged that WLFI had a blacklist secret feature. He said that this role had frozen his token wallet without any prior notice. In addition, he characterized the system as undemocratic and contrary to the concept of decentralization. In 2025, he also claimed that his wallet was blacklisted without any reasonable explanation.

Moreover, Justin Sun described why he was an early proponent of the project. He claimed that he put in a lot of money because it promised him financial freedom. However, he claimed that investors were never told about the important technical details. Thus, he referred to the system as deceptive and detrimental to investor rights in the world.

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Moreover, he was very critical of WLFI governance practices and decisions. He asserted that voting was not transparent and fair to users. He also said that the results were predetermined by insiders. As a result, he rejected all actions taken by the WLFI team.

In addition, Justin Sun required WLFI to unlock tokens that were affected at once. He encouraged the team to abide by the rules of governance. He also emphasized the need for trust and transparency.

Conversely, WLFI refuted all the claims in a point-blank statement. The project claimed that Justin Sun was making unfounded unsubstantiated claims. It charged him with attempting to conceal misconduct by making false charges. Moreover, WLFI claimed that it has good evidence to its side. The message was concluded with a legal threat, saying See you in court.

WLFI Borrowing Surge Raises Risk and Liquidation Concerns

In the meantime, there are independent data that raise concerns regarding WLFI operations. Chaos Labs announced an increase in borrowing on Dolomite. The report revealed that WLFI was close to its 5.1B limit on collateral usage.

In particular, approximately 3B WLFI tokens are used to borrow almost 40.7M stablecoins. The majority of these funds deal with USD1 and USDC in a looping format. Also, the liquidation threshold is close to 75%, which raises the risks to a considerable extent. The usage rates were 83.4% USD1 and 90.19% USDC.

In addition, the rates of borrowing are close to 5 percent and the supply rates were 10.64. These returns contain Merkl rewards, which are supposed to be over in 3 days. Meanwhile, WLFI collateral is said to be 4 times greater than Binance tradable supply. However, only 20% of tokens are currently unlocked.

Moreover, WLFI has recently paid off almost 10M in outstanding loans. It is reported that the team might include additional collateral in the near future. Today, WLFI has a total value locked of 82.7 and a borrowing share of 85.3. Therefore, this concentration level raises systemic risk issues and market exposure.

Lastly, this conflict, coupled with increasing leverage, has brought about uncertainty. Investors are keenly observing both the legal developments and financial risks. The result could affect the confidence in DeFi projects as tensions increase.

The post WLFI vs Justin Sun: Public Dispute Sparks Legal Warning appeared first on Live Bitcoin News.