- The token for World Liberty Financial hit an all-time low on Friday.
- The company has used that token to borrow its stablecoin, USD1, from DeFi protocol Dolomite — a circular arrangement that has raised eyebrows.
- An upcoming unlock has also weighed on the token’s price.
The token for World Liberty Financial plummeted to an all-time low on Friday amid plans to unlock new tokens and reports that suggest the company engaged in a dubious transaction using the DeFi protocol Dolomite.
World Liberty Financial’s token was trading around $0.93 on Thursday when CoinDesk reported the company used 5 billion WLFI as collateral to borrow $75 million in stablecoins, including its own USD1 stablecoin.
The company used a protocol called Dolomite, which was founded by Corey Caplan, a World Liberty Financial adviser. The series of transactions left Dolomite vulnerable to a sharp decrease in WLFI’s price and left some USD1 lenders unable to withdraw until World Liberty Financial closes its position, CoinDesk reported.
Come Friday afternoon New York time, the token had fallen 13% to about $0.79, an all-time low. The asset is now over 75% below its all-time high.
World Liberty Financial did not immediately return DL News’ request for comment.
Backed by the family of US President Donald Trump, World Liberty Financial slammed criticism of its Dolomite transactions as “FUD.”
“Yes, we supplied WLFI as collateral and borrowed stablecoins,” World Liberty said in a statement on X. “No, we are nowhere near liquidation — and frankly, even if markets moved dramatically against us, we’d simply supply more collateral.”
But it failed to address the fact that investors who had lent USD1 to Dolomite’s USD1-WLFI market were functionally stuck there until World Liberty Financial closes its position.
That’s because World Liberty Financial borrowed USD1 in such quantity that it functionally drained the pool, CoinDesk reported.
World Liberty Financial also attempted to quell fear that it would allow early investors to sell all their tokens.
World Liberty Financial will allow WLFI holders to vote to unlock their tokens in the coming weeks, the company said Thursday. Shortly thereafter, it returned to social media to clarify the scope of the upcoming vote.
“This is not a proposal to unlock all tokens at once,” it said on X. “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.”
Aleks Gilbert is DL News’ New York-based DeFi correspondent. Have a tip? You can reach him at aleks@dlnews.com.
