World

Liberty

DeFi

World Liberty Financial

Dolomite

<p><img width="1800" height="1100" src="https://financefeeds.com/wp-content/uploads/2025/09/Best-Crypto-To-Buy-as-Justin-Suns-Wallet-Blacklisted-by-WLFI.png" alt="Best Crypto To Buy as Justin Sun’s Wallet Blacklisted by WLFI" title="Zak Folkman Defends World Liberty’s $75M Dolomite Loan, Calls Justin Sun’s Claims False 108"></p>
<h2 id="why-is-world-liberty-s-dolomite-borrowing-under-scrutiny">Why Is World Liberty’s Dolomite Borrowing Under Scrutiny?</h2> World Liberty Financial co-founder Zak Folkman defended the project’s roughly $75 million borrowing position on Dolomite Markets, saying the loan was small relative to the collateral posted and was intended to raise utilization on the lending protocol. In an interview with The Block at Consensus 2026, Folkman said World Liberty had been the largest liquidity supplier on Dolomite before taking what he called “a very, very small loan.” He said the move helped lift activity across the protocol’s markets. The remarks followed April onchain disclosures showing a World Liberty wallet deposited about 5 billion WLFI tokens into Dolomite, then borrowed about $75 million in USD1 and USDC stablecoins against that collateral. Arkham data later showed that more than $40 million of the borrowed funds moved to Coinbase Prime. 
<h2 id="what-risks-did-analysts-flag">What Risks Did Analysts Flag?</h2> DeFi researchers raised concerns that the WLFI-backed position created concentration and liquidation risk for Dolomite lenders. The concern centers on the size of the collateral pool, the depth of WLFI liquidity, and the effect that any forced unwind could have on lenders exposed to the position. Large loans backed by project-linked tokens can become harder to assess when collateral liquidity is thin or closely tied to the borrower’s own ecosystem. In that setup, lenders face not only price risk but also governance, disclosure, and counterparty risk. 
<h3 id="investor-takeaway">Investor Takeaway</h3>
<div>
 Large DeFi loans backed by native or affiliated tokens can create hidden concentration risk, especially when collateral depth is weaker than headline loan values suggest.
</div>
<h2 id="how-did-folkman-respond-to-justin-sun-s-lawsuit">How Did Folkman Respond to Justin Sun’s Lawsuit?</h2> Folkman also addressed World Liberty’s legal dispute with <a href="https://financefeeds.com/binance-mulls-listing-trumps-stablecoin-as-cz-seeks-pardon/" rel="noopener noreferrer nofollow">Tron founder Justin Sun</a>, who filed a lawsuit in California federal court on April 22. Sun alleged that World Liberty improperly froze his WLFI tokens and blocked him from governance participation. Sun claimed the WLFI smart contract included undisclosed blacklist functionality and that World Liberty threatened to permanently burn his holdings. World Liberty denied the allegations. During the interview, Folkman said World Liberty was “blindsided” by the lawsuit and had retained Quinn Emanuel to pursue a defamation case against Sun. He described Sun’s claims as “blatantly false” and said the 20% unlock terms were disclosed in the project’s terms and conditions. Folkman also said the relevant <a href="https://financefeeds.com/atom-accelerator-puts-weight-behind-cosmwasm-coalition-offers-matching-funding-with-neutron/" rel="noopener noreferrer nofollow">smart contract functionality</a> was visible on Etherscan and other block explorers. 
<h3 id="investor-takeaway">Investor Takeaway</h3>
<div>
 Token freezes, unlock terms, and blacklist controls remain major legal and governance risks for crypto projects, even when the code is publicly visible.
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<h2 id="why-does-world-liberty-face-extra-attention">Why Does World Liberty Face Extra Attention?</h2> Folkman said World Liberty faces heavier scrutiny than other DeFi projects because of its ties to President Donald Trump. He described the affiliation as both a “blessing and curse,” arguing that it helped accelerate distribution while also drawing more media and public attention. <a href="https://financefeeds.com/trumps-world-liberty-enters-crypto-lending-with-new-defi-platform/" rel="noopener noreferrer nofollow">World Liberty’s USD1 stablecoin</a> is nearing a $4.5 billion market cap, according to The Block’s data dashboard. Folkman called it the “fastest-growing stablecoin of all time” and said it was the first to integrate <a href="https://financefeeds.com/axis-pulls-in-5m-as-it-preps-multi-asset-yield-layer-on-plasma/" rel="noopener noreferrer nofollow">Chainlink Proof of Reserves</a>. USD1 launched in March 2025, nearly 6 months after <a href="https://financefeeds.com/trumps-crypto-project-spends-45-million-on-token-buys/" rel="noopener noreferrer nofollow">Trump announced World Liberty Financial</a>. The firm has also filed an OCC charter application for a Limited Trust Company to act as its official issuer, a step that would bring the stablecoin closer to regulated trust-company infrastructure if approved.

Zak Folkman Defends World Liberty’s $75M Dolomite Loan,…

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