Trump-Backed Crypto Project Duplicates FTX Collapse Risk

World Liberty Financial (WLFI), a decentralized finance project co-founded by the Trump family, has drawn comparisons to FTX's collapse in November 2022. WLFI issued two primary crypto assets: a governance token called WLFI and a stablecoin named USD1, which is pegged to the US dollar and backed by US Treasuries and cash equivalents.

According to blockchain data, WLFI deposited 14 million USD1 into DeFi lending platform Dolomite on February 8, borrowed 11.4 million USDC, and sent those funds to a Coinbase Prime address minutes later. In total, WLFI pledged approximately 5 billion WLFI tokens as collateral on Dolomite, borrowing roughly $75 million in stablecoins.

The controversy centers around the fact that Dolomite was co-founded by Corey Caplan, who also serves as an adviser and reportedly the Chief Technology Officer of World Liberty Financial. This creates a conflict of interest, with WLFI essentially borrowing its own stablecoin from a protocol advised by one of its insiders.