World Liberty Financial, the Trump family-linked decentralized finance project, has dismissed community concerns over its aggressive borrowing as unfounded “FUD.” The project confirmed it is a major supplier and borrower on its own WLFI Markets platform, using 5 billion WLFI tokens worth $429 million as collateral to borrow over $75 million in USDC. This activity drained the platform’s liquidity and pushed lending rates to 13.5%, sparking fears of a potential bad debt and liquidation risk. WLFI insists its actions are standard and that it is “nowhere near liquidation,” with a vote on structured token unlocks planned for next week as the token’s price fell 15% to a yearly low.
The Trump family-backed World Liberty Financial has labeled recent criticism of its borrowing activity as a ‘wrong FUD.’ The DeFi project admitted it is one of the largest suppliers and borrowers on the Dolomite-powered WLFI Markets.
Community backlash began after on-chain data revealed the project deposited 3 billion WLFI tokens from its treasury as collateral. That collateral has since increased to 5 billion WLFI tokens, valued at $429 million.
Against this collateral, the project borrowed over $75 million of USDC. This drove the platform’s USDC lending rates to 13.5% but also drained the liquidity pool, preventing other investors from withdrawing their funds.
The situation sparked warnings of a potential bad debt and contagion risk for WLFI token holders. One user stated, Don’t be exit liquidity for Trump’s cartel: Those loans will likely never be repaid.
In its defense, the project said it took the loan to drive “outsized, compelling yield for everyone.” The team countered that its actions are ‘not risk,’ adding We are nowhere near liquidation — and frankly, even if markets moved dramatically against us, we’d simply supply more collateral.
Further community unease stems from impending WLFI token unlocks for early investors. The project clarified a vote is scheduled next week for a ‘structured, phased approach’ to these unlocks.
Currently, 70% of the WLFI supply is locked, with only 31 billion tokens circulating out of a 100 billion max supply. The altcoin’s price has dropped 15% in three days to a yearly low of $0.081 amid the scrutiny.
