World Liberty Financial, a crypto venture with known connections to the Trump family, has come under the spotlight over its dealings within the decentralized finance (DeFi) ecosystem. The company’s activities on the Dolomite protocol have raised concerns across the crypto community, with observers pointing to potential risks stemming from insider access and the concentration of assets and liabilities within a single platform.
Major collateral and borrowing operations on Dolomite
In early February, World Liberty Financial’s treasury deposited USD 14 million worth of its proprietary stablecoin, USD1, as collateral on the Dolomite protocol. Against this collateral, the company borrowed 11.4 million USDC. Notably, soon after these transactions, the borrowed cryptocurrency was transferred to Coinbase Prime, a leading exchange. Two days later, the treasury sent an additional 12.5 million USD1 directly to the exchange, with this transfer not involving any borrowing component.
Subsequent transactions saw the introduction of the project’s own WLFI tokens as an instrument for further borrowing. On February 20, the treasury staked 890 million WLFI on Dolomite and borrowed USD 20 million worth of USD1. Later, on March 24, the company added another 1.1 billion WLFI as collateral. As of now, nearly 2 billion WLFI tokens remain locked as collateral on the protocol. In total, the company appears to have secured some USD 31.4 million in stablecoins through these repeated collateralized loans.
Liquidity concentration and emerging market risks
Industry attention has also focused on the overlap between Dolomite’s leadership and World Liberty Financial itself. Corey Caplan, a founder of Dolomite, is reported to serve as an advisor to World Liberty Financial. Currently, the WLFI token dominates liquidity on Dolomite, accounting for 55% of all liquid assets on the protocol. This high proportion indicates that Dolomite’s liquidity is heavily concentrated in one project’s tokens, amplifying risk should market dynamics shift unexpectedly.
A similar concentration is apparent in the protocol’s USD1 pool, where the outstanding supply is valued at USD 4.6 billion. Utilization levels are high, with 93% of USD1 currently put to use as collateral. Such a concentration means that typical investors may struggle to withdraw their assets at will, and mass exits from the pool could result in significant delays.
Current figures show the interest rate on USD1 stands at 16.24%, while the borrowing rate is 9.18%. These unusually high rates suggest liquidity is not organic or broadly shared, but instead revolves within a narrow group of actors tied to the project.
Additional risks lurk behind these collateralized loans using WLFI tokens. The volume of WLFI tokens used as collateral far exceeds normal trading volumes for the token. Should the WLFI price suddenly plummet and Dolomite’s liquidation mechanisms trigger, large forced sales could drive the price down rapidly. In such a cascading scenario, the platform could be unable to cover outstanding loans, potentially exposing other investors on Dolomite to losses.
In April, the company’s approach shifted to a new tactic. On April 2, the treasury transferred 2 billion WLFI tokens to a proxy wallet address managed through Gnosis Safe. Five days later, another 1 billion tokens were sent to the same address. The specific purpose and eventual destination of these large token transfers have not been clarified, and it remains unknown whether they were deployed back into the Dolomite protocol. At current prices, these additional 3 billion tokens are valued at roughly USD 266 million in the market.
World Liberty Financial has yet to respond to media inquiries seeking explanations or comment on these operations.
There has been no reply from World Liberty Financial regarding questions from the press on these transactions, according to reports.
The lack of transparency has intensified debate in the crypto sector, as critics warn that such high concentrations of tokens and insider ties could make the system vulnerable to rapid shifts in trust or market activity. Observers argue that the current structure poses a significant threat to retail participants who may be unaware of mounting systemic risk.
Regulatory specialists have also weighed in, suggesting that if liquidity is withdrawn en masse, ordinary users could find themselves unable to recover funds promptly. As the protocol’s liquidity remains heavily reliant on a few major players, it lacks the diversity seen in more established DeFi systems.
As scrutiny mounts, calls have grown louder for World Liberty Financial and Dolomite to increase transparency, reduce risk concentration, and provide clear disclosures. For now, much about their strategies and internal links remains opaque, leaving market observers on alert for further developments.
