World Liberty Financial, a Trump family-backed crypto project, pushed back against recent concerns of potential liquidation risk in its transactions with Dolomite, a lending protocol co-founded by a World Liberty advisor.
Onchain data from Arkham shows that a wallet belonging to World Liberty Financial recently deposited roughly 5 billion WLFI tokens on Dolomite, co-founded by World Liberty Advisor Corey Caplan.
The World Liberty wallet then used the WLFI tokens as collateral to borrow $75 million in USD1 and USDC stablecoins and subsequently transferred over $40 million to Coinbase Prime, reportedly hours ahead of Trump’s U.S.-Iran ceasefire announcement.
DeFi researchers and analysts on X warned that an oversized collateral position on Dolomite creates a high risk of bad debt for other lenders on the protocol, especially if WLFI’s price drops below liquidation thresholds.
“If that WLFI collateral position ever gets close to liquidation, it’s basically unliquidatable without major losses for lenders,” wrote X user EthanDeFi, pointing to WLFI’s relatively low liquidity with a $10 billion fully diluted valuation. “If you have any USD1 or other stablecoins lent on Dolomite to pools that accept WLFI collateral, my advice is to withdraw it asap.”
Dolomite’s dashboard shows that WLFI accounts for $428.9 million in supply liquidity, which is more than half of the protocol’s $825.4 million in supplied assets. This could also be seen as a major concentration risk to Dolomite, as potential instability in WLFI could impact the protocol.
The price of WLFI dropped 5.6% over the past 24 hours to $0.86 after the controversy intensified and spread across social media, and remains down 14% over the past seven days, according to The Block’s WLFI price page.
‘FUD’
In a thread of X posts published on Thursday, World Liberty pushed back against market concerns over its borrowing position, dismissing them as FUD (Fear, Uncertainty, and Doubt) while acknowledging that it supplied WLFI as collateral to borrow stablecoins.
“We are nowhere near liquidation — and frankly, even if markets moved dramatically against us, we’d simply supply more collateral,” the team wrote. “That’s not a risk. That’s how this works.”
World Liberty claimed that by becoming the “anchor borrower” on Dolomite, the team is generating higher yields for other users lending stablecoins on WLFI markets.
The team also expressed strong confidence in its WLFI tokens, noting that it has repurchased over 435 million WLFI tokens in the past six months.
Upcoming token unlock
World Liberty also teased a long-anticipated token unlock event for early participants, saying that it plans to release a governance proposal next week for community input, followed by a formal vote shortly after.
The team said that it is not proposing to unlock all tokens at once. “The vote will be on a long-term vesting and unlock schedule for retail early purchasers — a structured, phased approach designed with the long-term health of the ecosystem in mind,” the project said in a separate post.
“The critics are looking at the wrong thing,” World Liberty added. “We’re building something that compounds.”
© 2026 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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