World Liberty Financial (WLFI), a cryptocurrency project closely tied to U.S. President Donald Trump, faces allegations that the project is unjustly freezing tokens, effectively stealing investors’ funds.
The first such allegation was made by Bruno Skvorc, a blockchain developer from Croatia, who posted screenshots on X on Saturday showing an email from WLFI’s compliance team, which flagged his wallet as “high risk” and refused to unlock his tokens. “They stole my money,” Skvorc wrote. “And because it’s the President’s family, I can’t do anything about it. This is the new age mafia. There is no one to complain to, no one to argue with, no one to sue.”
Skvorc claims he is one of six early investors whose tokens remain completely locked since the project began. He pointed out the contradiction: “It was not ‘high risk’ to accept money from this address, but it is high risk to unlock owed money into it.”
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Justin Sun Also Affected
Skvorc isn’t the only one affected by WLFI’s wallet freezes. Tron founder Justin Sun, who invested over $75 million in WLFI, also had his tokens locked. His wallet held about 540 million unlocked tokens, and 2.4 billion locked tokens, which can’t be moved yet. WLFI froze his funds after blockchain trackers spotted a $9 million transfer to exchanges like HTX, raising concerns he might be selling tokens during the project’s shaky launch. Sun has denied this, calling the transfers routine tests, and demands WLFI unfreeze his assets.
Sun called the freeze “unreasonable” and insisted the flagged transactions were routine exchange deposits, not sales. “Tokens are sacred and inviolable,” Sun posted on X. “This goes against the core values of blockchain technology.”
Despite the setback, Sun announced plans to purchase $20 million worth of additional WLFI tokens to demonstrate his long-term commitment to the project.
Compliance Tools Draw Criticism
The incident sparked widespread criticism of automated compliance systems used by crypto projects. Blockchain investigator ZachXBT explained that these tools frequently flag addresses incorrectly for minor reasons, such as interacting with exchanges or DeFi contracts.
“These tools are deeply flawed,” ZachXBT said. “I helped a team manually review addresses because popular compliance tools labeled them high risk due to unrelated activity several hops away.”
WLFI flagged Skvorc’s wallet for suspicious activity, citing three primary concerns: a previous transaction processed through the crypto mixer Tornado Cash, known for its use in anonymizing funds; indirect ties to sanctioned Russian cryptocurrency exchanges Garantex and Netex24, which raised red flags for potential illicit activity; and interactions with a third-party dashboard that was subsequently identified as fraudulent.
Problem of centralization in blockchain?
These developments show that many of the so-called decentralized finance (DeFi) projects, including WLFI, have centralized features in their smart contracts. This allows them to freeze or restrict users’ wallets as and when they deem fit. Critics, including Sun, say that these actions are contradictory to the principles of DeFi.
According to experts, this development should serve as a caution for the entire crypto market. DeFi’s principles of fairness and transparency seem to be undermined by the use of features of centralized systems.
As the community frustration grows, the incident highlights a critical point: reliance on “official teams” to manage token ecosystems is being questioned, and users are demanding greater accountability and decentralized governance to safeguard their digital assets.
