Trump-Backed World Liberty Financial Borrows Millions from DeFi Lending Protocol

World Liberty Financial (WLFI), a cryptocurrency venture co-founded by the Trump family, has been utilizing decentralized finance (DeFi) lending protocol Dolomite for its financial operations. An analysis of onchain records reveals that WLFI's treasury has deposited significant amounts of its own stablecoin as collateral into Dolomite and borrowed against it.

The transactions in question began on February 8th when WLFI's treasury deposited $14 million USD1, a dollar-pegged stablecoin, into Dolomite as collateral. This was followed by the borrowing of approximately $11.4 million USDC minutes later. Further analysis reveals that WLFI's treasury sent another $12.5 million USD1 to Coinbase Prime on February 10th, which is typically used for converting crypto to fiat or institutional OTC trading.

However, the use of Dolomite as a borrowing platform has raised concerns about insider access, circular token economics, and concentrated risk to other depositors. The choice of protocol is notable, as Dolomite co-founder Corey Caplan serves as an advisor to World Liberty Financial. This structural concern is exacerbated by Dolomite's USD1 pool, which has a utilization ratio of approximately 93%.

Ordinary depositors who lent USD1 to the pool expecting to withdraw at will may find their funds effectively locked until the large borrower repays. Additionally, the collateral backing WLFI-denominated borrowings poses another problem: WLFI trades with limited market depth relative to the size of the position. This raises concerns that a sharp decline in price could lead to forced sales and bad debt for Dolomite.