World Liberty Financial (WLFI), a crypto venture associated with the Trump family, has utilized the decentralized finance (DeFi) lending protocol Dolomite in a manner that prompts scrutiny. Onchain data reveals WLFI deposited its own stablecoin, USD1, as collateral to borrow USDC, which was subsequently transferred to Coinbase Prime.
Later, WLFI deposited substantial amounts of its own native token, WLFI, into Dolomite as collateral to borrow further stablecoins. This activity has significantly increased the utilization of Dolomite's USD1 lending pool, impacting the ability of other depositors to withdraw their funds.
Adding to the concern, Dolomite co-founder Corey Caplan also serves as an advisor to World Liberty Financial. The significant WLFI collateral in Dolomite represents a large portion of the protocol's total liquidity. The limited market depth of the WLFI token poses a risk; a sharp price decline could trigger liquidations that destabilize the protocol and impact its retail depositors.
Further large transfers of WLFI tokens have been observed, with their destination not yet publicly confirmed.