World Liberty Financial co-founder Zak Folkman is defending the Trump-backed DeFi project against allegations of a hidden 'backdoor' in its smart contracts, arguing that all code was publicly visible on the blockchain.
The defense comes in response to a federal lawsuit filed by Tron founder Justin Sun in California, who claims a blacklisting function was used to freeze approximately $107 million worth of WLFI tokens in his wallet without prior notice.
Folkman's counter-argument: Smart contracts are public code, and anyone with a block explorer can audit them. The question, however, is whether investors were meaningfully informed about the implications of that function before committing capital.
Sun invested around $45 million in WLFI, with total commitments estimated at $75 million, and served as an advisor before his wallet was blacklisted in September 2025. WLF says the function is used for KYC and AML compliance, while Sun accuses the project of fraud and breach of contract.
World Liberty Financial carries the Trump family name, with Eric Trump and Donald Trump Jr. involved in management. The broader transparency debate echoes the DeFi mantra that 'code is law,' but critics argue that a blacklisting capability-while standard in tokens like USDC-must be clearly communicated to investors beyond just publishing readable code.