WLFI Borrows $75 Million From Its Own Users on Dolomite, Token Hits All-Time Low

World Liberty Financial made a move this week that has split the crypto community sharply. The Trump family-backed project used 5 billion of its own WLFI tokens as collateral on the Dolomite DeFi lending protocol, borrowed approximately $75 million in stablecoins, and immediately routed more than $40 million of those funds to Coinbase Prime. 

The sequence of transactions, tracked in real time through Arkham and Etherscan, did not go unnoticed.

What followed was predictable. The WLFI token fell 12 percent to its lowest level since its 2025 launch, and the community that had been watching on-chain data began asking a question the project still has not cleanly answered: why did tens of millions of dollars borrowed from a user-funded stablecoin pool end up on an institutional crypto trading desk within hours?

Key Takeaways

• WLFI borrowed 65.4 million USD1 and 10.3 million USDC on Dolomite, though $15 million was subsequently repaid, with the structure raising immediate conflict-of-interest questions since Dolomite co-founder Corey Caplan also serves as an advisor to WLFI.
• The borrowing pushed the utilization rate of the USD1 pool on Dolomite to approximately 93%, making it difficult for ordinary depositors to withdraw their funds in a timely manner.
• WLFI's treasury buybacks of 435.3 million tokens at an average price of $0.1507 are now significantly underwater, with the token trading roughly 48% below the buyback average.

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What Exactly Happened: The On-Chain Sequence

The transaction trail begins in February 2026. On February 8, WLFI's treasury deposited 14 million USD1 into Dolomite as collateral and borrowed 11.4 million USDC against it. Minutes later, 11.45 million USDC moved to a Coinbase Prime deposit address. 

Two days later, another 12.5 million USD1 was sent directly from the WLFI treasury to a separate Coinbase Prime address — not as part of a Dolomite loan, but straight from treasury reserves to what is typically used as a fiat conversion or institutional OTC trading service.

The activity then escalated in April. WLFI's official treasury multisig routed roughly 3 billion WLFI tokens through an intermediary wallet before depositing the full amount into Dolomite as collateral, with the treasury wallet also having deposited roughly 2 billion WLFI directly. 

The total collateral position reached approximately $460 million in nominal value — but that valuation depends entirely on a thinly traded token maintaining a price it clearly struggled to hold once the news broke.

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The Conflict of Interest at the Center of This Story

The Dolomite connection is where the structural concern runs deepest. Dolomite is the lending protocol co-founded by Corey Caplan, who is World Liberty Financial's chief technology officer, and WLFI launched World Liberty Markets in January in partnership with Dolomite, offering lending and borrowing services for its USD1 stablecoin.

In traditional finance, a related-party transaction of this scale typically requires disclosure and independent board approval. In DeFi, those guardrails are largely absent, and WLFI has taken full advantage of that gap.

The project used its own governance token as collateral, borrowed its own USD1 stablecoin, from a protocol where its own advisor sits as co-founder, and sent the proceeds to Coinbase Prime. 

The funds were moved shortly before U.S. President Donald Trump announced a ceasefire between the United States and Iran, prompting analysts to examine whether the market had sufficient liquidity to absorb the moves and what level of systemic risk the loans may have introduced.

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WLFI's Response and Why It Made Things Worse

World Liberty Financial published a public defense on X on April 9. The project framed itself as an "anchor borrower," arguing that borrowing generates yield for other users at a time when traditional markets offer little, and stated that it is "nowhere near liquidation — and frankly, even if markets moved dramatically against us, we would simply supply more collateral."

That response landed poorly for one specific reason: adding more WLFI to back a position denominated in WLFI on a protocol advised by WLFI's own advisor is a form of circularity that highlights rather than resolves the concern. 

The token fell further after the statement was published. By Friday afternoon New York time, the token had fallen 13% to about $0.079, an all-time low, and is now over 75% below its all-time high. WLFI also did not address why Coinbase Prime received over $40 million or what those funds were used for.

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Regulatory Scrutiny Mounting on Multiple Fronts

The Dolomite episode does not exist in isolation. A Times investigation released on April 7, 2026, found that WLFI had partnered with AB DAO, whose recent flagship project involved individuals later sanctioned by the United States and Britain. 

With the company unaware that AB DAO had promoted a resort project linked to figures associated with Cambodia's Prince Group, which U.S. authorities describe as a major transnational criminal network.

Separate from the Dolomite controversy, Democratic Senators Elizabeth Warren and Jack Reed urged the Department of Justice and the Treasury to launch an investigation into the company over concerns that its token sales may have reached wallets connected to sanctioned entities in North Korea, Russia, and Iran. 

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WLFI denied those allegations and said its compliance process rejected millions of dollars in presale purchases. 

The Wall Street Journal also reported that a company backed by UAE national security adviser Sheikh Tahnoon bin Zayed Al Nahyan quietly agreed to acquire a 49% stake in WLFI for $500 million shortly before Trump returned to office. 

Taken together, the regulatory picture is becoming considerably more complicated than a single lending position.

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Conclusion

The WLFI situation is a sharp reminder that DeFi's permissionless architecture can create conditions that would not be tolerated in any regulated financial environment. 

Borrowing from your own users through a protocol your advisor co-founded, using collateral you issued yourself, then sending the proceeds to an institutional fiat conversion desk — each step is technically permissible in DeFi, and each step raises a serious question that ordinary retail depositors, currently locked out of the USD1 pool, deserve a direct answer to. 

Whether the project can restore confidence after a 75% decline from its all-time high and mounting regulatory pressure on multiple fronts remains the central question for anyone still holding WLFI.

Do your own research before investing, start by checking the latest WLFI price and create or log in to your account to buy WLFI securely on Bitrue.

FAQ

What did WLFI do with the $75 million it borrowed on Dolomite?

WLFI borrowed 65.4 million USD1 and 10.3 million USDC, though $15 million was subsequently repaid. More than $40 million of the borrowed funds were transferred to Coinbase Prime, which is typically used for institutional OTC conversion or fiat off-ramping. WLFI has not publicly disclosed what those funds were used for.

Why is the Dolomite loan a conflict of interest?

Dolomite was co-founded by Corey Caplan, who serves as World Liberty Financial's chief technology officer. WLFI borrowed its own USD1 stablecoin from a protocol run by its own insider, using its own governance token as collateral, without any independent oversight or public disclosure prior to the transactions.

Why can Dolomite depositors not withdraw their USD1?

The borrowing pushed the utilization rate of the USD1 pool on Dolomite to approximately 93%. When utilization is that high, there is almost no available liquidity left in the pool for other depositors to withdraw against. Those lenders remain locked until WLFI repays enough of its position to bring utilization back to a reasonable level.

What is the WLFI token price at its all-time low?

The WLFI token fell to approximately $0.079, its all-time low since trading began in September 2025, and is now over 75% below its all-time high. The token lost roughly 12 to 13 percent in a single day following public disclosure of the Dolomite position.

Is there a risk that WLFI gets liquidated on Dolomite?

WLFI has publicly stated there is no liquidation risk and says it would simply add more collateral if prices dropped further. However, because WLFI has limited market depth, a price drop triggering liquidation could cause forced selling that rapidly erodes collateral value, leaving depositors exposed to bad debt the protocol cannot absorb.

What senators are investigating WLFI and why?

Senators Elizabeth Warren and Jack Reed urged the Department of Justice and the Treasury to investigate WLFI over concerns that its token sales may have reached wallets connected to sanctioned entities in North Korea, Russia, and Iran. WLFI denied these allegations, and independent blockchain researchers subsequently disputed portions of the watchdog report that initiated the inquiry.

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