The DeFi project’s treasury used 3 billion WLFI tokens as collateral on Dolomite to borrow $75 million in stablecoins over the past week.
World Liberty Financial, the DeFi venture affiliated with the Trump family, leveraged its treasury to borrow roughly $75 million in stablecoins from Dolomite, the lending protocol co-founded by WLFI’s chief technology officer, Corey Caplan.
On-chain data shows WLFI’s official treasury multisig routed approximately 3 billion WLFI tokens through an intermediary wallet over the past week before depositing the full amount into Dolomite as collateral. The treasury wallet previously deposited roughly 2 billion WLFI directly into Dolomite. The collateral positions are currently valued at roughly $460 million as of April 9, per Dolomite’s stats page.
In the new wallet, the team borrowed 65.4 million USD1 and 10.3 million USDC, roughly $75.7 million in total, although $15 million was repaid on April 7, according to on-chain data.
World Liberty Financial launched World Liberty Markets in January, in partnership with Dolomite, offering lending and borrowing services for its USD1 stablecoin. The arrangement effectively means WLFI built its flagship DeFi product on infrastructure created by one of its own executives, and then used its treasury to become the dominant borrower on that same platform.
WLFI collateral now accounts for more than half of Dolomite’s deposits. The dynamic has drawn comparisons to some of DeFi’s most cautionary episodes involving founders leveraging their own governance tokens.
In June 2024, Curve Finance founder Michael Egorov was forced into roughly $80 million in CRV liquidations after borrowing nearly $100 million in stablecoins across multiple lending protocols using CRV as collateral. At the time, onlookers argued that Egorov had effectively cashed out without selling, extracting $100 million in stablecoins from a $140 million CRV position.
The playbook echoes an even earlier precedent. In January 2022, Wonderland co-founders Daniele Sestagalli and 0xSifu suffered cascading liquidations after leveraging their staked TIME tokens as collateral on Abracadabra, a lending protocol within their own Frog Nation ecosystem. The founders’ oversized positions cratered TIME from $800 to $360 in hours, triggering a vicious cycle in which liquidated collateral was sold into an already weak market, fueling further margin calls.
DeFi analyst Ethan described WLFI’s maneuver as a similar mechanism to extract liquidity without directly selling tokens, while Ignas warned that the WLFI-backed borrowing may ultimately prove unrepayable.
WLFI Slides to All-Time Low
The WLFI token briefly fell nearly 10% on April 9, hitting $0.0885, its lowest level since trading began in September 2025, according toCoingecko.
The thin market depth compounds the risk: if an actor were to aggressively short WLFI, the resulting price drop could trigger a liquidation cascade that Dolomite cannot absorb, since there is no clean path to liquidating billions of illiquid governance tokens.
USD1 is backed by U.S. Treasuries and cash equivalents, limiting the risk of a full depeg. But with USD1’s circulating supply now exceeding $4 billion, the fallout from a Dolomite crisis could extend well beyond the WLFI token itself.
The episode arrives alongside a separate controversy. An investigation by The Times found that WLFI had integrated USD1 with AB DAO, a Southeast Asian blockchain project that had been promoting a resort linked to Cambodia’s Prince Group, whose founder Chen Zhi was sanctioned by U.S. and U.K. authorities in November over alleged involvement in large-scale online fraud. WLFI said it was unaware of AB DAO’s prior ties.
World Liberty Financial has not issued a public statement addressing the recent borrowing, and Dolomite did not immediately respond to The Defiant’s request for comment.
This article was written with the assistance of AI workflows. All our stories are curated, edited and fact-checked by a human.
