World Liberty Financial’s WLFI token experienced a significant decline, dropping nearly 10% to $0.0888 on April 9, marking its lowest value since launching in late 2025. The sharp fall was triggered by two separate controversies that surfaced almost simultaneously, raising questions among investors about both the project’s partners and its recent on-chain activities.
WLFI, an emerging player in blockchain-based finance, issues USD1, a stablecoin pegged to the U.S. dollar, and operates a treasury managing assets on-chain. The organization has marketed itself as a compliant, transparent operator and has rapidly expanded since its debut, drawing attention within the decentralized finance sector.
Partner scrutiny follows sanctioned connections
Reports from The Times on April 7 revealed that WLFI’s USD1 stablecoin became integrated with AB DAO, a blockchain project based in Southeast Asia. AB DAO was previously associated with a luxury resort promoted by Cambodia’s Prince Group — a conglomerate headed by Chen Zhi. In November, U.S. and U.K. authorities sanctioned Chen Zhi, seizing $15 billion in bitcoin amid allegations of involvement in widespread online fraud.
WLFI responded by emphasizing its due diligence procedures and clarified that it does not have any relationship with persons or entities targeted by sanctions. The Times noted that WLFI was reportedly unaware of AB DAO’s past links with Prince Group when formalizing the partnership.
Prior accusations had also targeted WLFI regarding token sales to digital wallets associated with countries under sanctions such as Iran, North Korea, and Russia. These claims have been refuted by WLFI. The recent integration with AB DAO reignited concern about counterparty risks and regulatory scrutiny around WLFI’s business relationships.
The additional spotlight raised doubts about WLFI’s vetting processes and the robustness of its compliance framework. While the firm insists on the legitimacy of its actions, investor sentiment has shifted as compliance risks become more visible in light of ongoing investigations.
Treasury maneuvers deal liquidity shocks
Separate reporting by BeInCrypto highlighted that WLFI’s treasury transferred 3 billion WLFI tokens to the Dolomite protocol and subsequently borrowed in excess of 50 million units of USD1 stablecoin. Blockchain data also showed the use of an intermediary wallet for this transaction, funnelling a total of 5 billion WLFI tokens into Dolomite before the borrowing occurred.
Against this collateral, the team took out loans totaling 65.4 million USD1 and 10.3 million USDC, with more than 40 million USD1 subsequently moved to Coinbase Prime. The current market value of the collateral on Dolomite stands at approximately $440 million.
The impact was quickly felt as Dolomite’s USD1 lending pool hit 100% utilization, rendering withdrawals impossible for depositors until substantial loan repayments are made. Interest rates soared above 35%, driven by a tight pool controlled largely by a single treasury actor rather than broader market demand.
With USD1 now circulating at over $4.6 billion, the concerns now center on the broader risks to Dolomite’s solvency and the potential for market disruptions. Though USD1 is reportedly backed by cash and U.S. Treasuries, fears remain that a sudden drop in WLFI’s price could set off forced liquidations and amplify risks across the decentralized finance space, drawing comparisons to the Terra collapse in 2022.
As of now, World Liberty Financial has not released a public statement addressing the transactions or the destination of the funds transferred from its treasury.
