WLFI's $75 million lending game: Dolomite depositors are deeply trapped

Original Author: ChandlerZ, Foresight News

On April 9, CoinDesk reported that World Liberty Financial (WLFI), a crypto project co-founded by the Trump family, conducted multiple collateralized lending transactions through the DeFi lending protocol Dolomite, sparking market attention regarding insider relationships, circular financing, and liquidity risks. On the DeFi lending protocol Dolomite, WLFI used approximately 5 billion WLFI tokens as collateral and cumulatively borrowed approximately 75 million USD stablecoins, with over 40 million USD flowing to Coinbase Prime, allegedly for fiat conversion or over-the-counter trading.

Two months, five transactions, one complete capital chain

In terms of specific operations, on February 8, WLFI’s treasury deposited 14 million USD1 as collateral on Dolomite and borrowed 11.4 million USDC. Minutes later, 11.45 million USDC was transferred to a Coinbase Prime deposit address. Coinbase Prime is typically used for converting cryptocurrencies to fiat or institutional OTC trading.

Two days later, WLFI directly transferred 12.5 million USD1 from its treasury to another Coinbase Prime address. This fund did not go through Dolomite lending but directly sent its own issued stablecoin to a fiat exit.

On February 20, WLFI tokens debuted. The treasury deposited 890 million WLFI on Dolomite and borrowed 20 million USD1. On March 24, it added another 1.1 billion WLFI. Combined across two rounds, 1.99 billion WLFI was locked as collateral on Dolomite, and the treasury cumulatively obtained approximately 31.4 million USD stablecoins from the protocol.

In April, the scale escalated again. On April 2, WLFI’s treasury transferred 2 billion WLFI to a Gnosis Safe proxy wallet (address 0x44a681DD); on April 7, it transferred another 1 billion. These 3 billion tokens are worth approximately 266 million USD at current prices but did not directly enter Dolomite, with the destination unclear.

Adding all lending channels and direct transfers, WLFI has cumulatively mobilized approximately 75 million USD stablecoins through Dolomite and Coinbase Prime.

This choice of protocol was not accidental. Public information shows that Dolomite co-founder Corey Caplan simultaneously serves as a WLFI advisor, and WLFI’s lending platform “WLFI Markets” is also built on the Dolomite protocol. In other words, WLFI borrowed stablecoins it issued on a protocol co-founded by its own advisor, using tokens it issued as collateral.

In traditional finance, such related-party transactions require information disclosure and independent director approval. In this case, these firewalls barely exist.

Depositors’ liquidity is being squeezed out

WLFI currently accounts for approximately 55% of Dolomite’s platform-wide 458.9 million USD in supplied liquidity, with a total platform supply of 835.7 million USD.

Specifically on the USD1 pool, of 180 million USD supplied, 167.5 million USD has already been borrowed, with utilization at approximately 93%. The pool has only approximately 12.5 million USD in available liquidity remaining, making it practically difficult for large depositors to fully withdraw their funds. The pool’s utilization rate once touched 100%.

The USD1 supply rate is 16.24%, and the borrowing rate is 9.18%. These rates reflect concentrated lending activity dominated by a single large borrower, not broad organic demand.

Risks on the collateral side are equally pronounced. WLFI token market depth is extremely limited, with daily trading volume far below the collateral scale. Once the price drops sharply and triggers Dolomite’s liquidation mechanism, forced selling will crush the token price before collateral is recovered, and the resulting bad debt will ultimately be borne by ordinary depositors currently unable to exit.

This is not the first time: from “Spy Prince” to sanctions-related connections

Dolomite lending is just the latest link in WLFI’s chain of conflicts of interest.

According to the Wall Street Journal, related company documents and informed sources revealed that four days before Trump’s inauguration, a confidant of an Abu Dhabi royal family member secretly signed an agreement with the Trump family to acquire 49% of the Trump family’s crypto project World Liberty Financial for 500 million USD. The buyer would prepay half the amount, or 187 million USD, directly flowing into a Trump family entity.

The transaction was supported by Abu Dhabi Prince Sheikh Tahnoon bin Zayed Al Nahyan, who has been promoting U.S. approval for acquiring strictly controlled AI chips and is commonly referred to as the “Spy Prince.” He is the brother of the UAE President and National Security Advisor and the leader of the country’s largest sovereign wealth fund, managing over 13 trillion USD in assets.

Documents show that in Aryam Investment 1’s first 250 million USD investment, backed by Tahnoon, 187 million USD flowed to two entities under the Trump family: DT Marks DEFI LLC and DT Marks SC LLC. Besides payments to entities of the Witkoff family, another 31 million USD flowed to entities associated with co-founders Zak Folkman and Chase Herro.

Under the agreement, Aryam became the largest shareholder of World Liberty and the only known investor besides the founders. The agreement also arranged for two Aryam executives (who simultaneously serve as executives at Tahnoon’s G42 company) to join World Liberty’s five-person board, which at the time included Eric Trump and Zach Witkoff, son of Steve Witkoff.

Steve Witkoff’s wealth surged 15% in 2025, reaching 2.3 billion USD, while when he started working for the government, his wealth was estimated at 2 billion USD. WLFI was the primary driver, with his family cumulatively profiting at least 200 million USD from token sales and related transactions. According to disclosures by House Democrats, the Federal Ethics Office has not signed Witkoff’s financial disclosure documents for 7 months.

Additionally, WLFI’s stablecoin USD1 previously established cooperative relationships with Southeast Asian blockchain project AB DAO, which was previously associated with Cambodia’s Prince Group. The group’s leader Chen Zhi was sanctioned by both the U.S. and UK in November 2025 for involvement in massive cybercrime allegations, with the U.S. Department of Justice seizing approximately 12.7 billion USD in Bitcoin in related operations. WLFI responded that it was unaware of AB DAO’s past associations.

On February 23, USD1 temporarily depegged and fell to 0.994 USD, with 270 million USD in funds flowing out in panic. WLFI claimed it was subjected to “coordinated attacks,” including a hacked co-founder X account, hired KOLs spreading panic, and shorting WLFI tokens, but never provided any technical evidence.

On-chain data also shows that WLFI transferred approximately 3 billion tokens to multiple addresses in early April, with a nominal value of approximately 266 million USD, with the destination still unclear. With multiple controversies stacked, WLFI token price has currently fallen to 0.0858 USD, hitting a record low since launch.

WLFI’s response: No liquidation risk exists

On April 10, WLFI tweeted in response to market questions about its lending positions on WLFI Markets, stating that WLFI is currently one of the largest suppliers and borrowers on WLFI Markets, borrowing stablecoins using WLFI as collateral, but there is no liquidation risk, and collateral can be increased at any time even with significant market volatility.

On the data front, WLFI disclosed that USD1’s current annualized revenue is approximately 159.5 million USD, and over the past 6 months has repurchased approximately 435 million WLFI tokens in the secondary market for a cumulative amount of approximately 65.58 million USD. The project also stated it will propose a governance proposal next week to discuss unlocking early-locked tokens and upgrading USD1 functionality, including support for gas-free transfers and adaptation to AI payment infrastructure.

USD1 currently has a market cap of approximately 4.3 billion USD, ranking high in the stablecoin market. WLFI’s response attempts to shift the narrative from “conflicts of interest” to “business growth,” but it does not answer: as the largest borrower in the lending pool, how does WLFI ensure that extreme market conditions will not cause losses to ordinary depositors? When Dolomite’s co-founder simultaneously serves as a WLFI advisor, who guarantees the protocol’s risk control independence?

Currently, neither Dolomite nor WLFI has clarified the governance process for related-party transactions.