Trump-Backed Project Embroiled in DeFi Lending Controversy
World Liberty Financial (WLFI), a decentralized finance project co-founded by members of the Trump family, has been accused of engaging in a similar risk-taking behavior to FTX's Alameda Research before its collapse. According to blockchain data and on-chain analytics firms, WLFI has pledged approximately 5 billion WLFI tokens as collateral on Dolomite, a DeFi lending platform, borrowing around $75 million in stablecoins.
The controversy centers around the fact that WLFI's Chief Technology Officer, Corey Caplan, also co-founded Dolomite and serves as an adviser to WLFI. This creates a conflict of interest, as WLFI is essentially borrowing its own stablecoin (USD1) from a platform advised by its own insider.
The immediate consequence for regular users was that Dolomite's USD1 lending pool was pushed to a 93% utilization rate, leaving ordinary depositors unable to withdraw their funds in a timely manner. Critics pointed out that WLFI's offer to 'simply supply more collateral' only deepens the circular risk.