Trump-Linked Crypto Project Faces Backlash for Freezing Investor Tokens

Justin Sun, one of the largest investors in the Trump-linked crypto venture World Liberty Financial (WLFI), has accused the project of freezing his token holdings without explanation. This incident has sparked broader scrutiny over the governance and transparency of the Trump family’s crypto initiative, which is marketed as a decentralized alternative to traditional finance. Sun’s allocation was reportedly blacklisted following a $9 million transaction flagged by blockchain tracking tools, leading him to publicly demand the release of his tokens on X, stating the action violated the core principles of blockchain technology [1].

The controversy follows similar claims from a blockchain developer, Bruno Skvorc, who alleged that WLFI refused to unlock his tokens due to a compliance system that flagged his wallet as “high risk.” Skvorc argued that the project had enforced a 100% lockup from the outset for several investors and that the compliance tools used were flawed, often mislabeling addresses due to unrelated activity such as prior interactions with crypto mixers or now-blacklisted platforms [2]. Onchain sleuth ZachXBT supported this view, noting that automated compliance systems frequently make incorrect risk assessments, undermining the trust and utility of decentralized systems.

WLFI tokens, the governance token of World Liberty Financial, began trading publicly on September 1 and experienced rapid volatility, typical of newly launched crypto assets. Justin Sun, who initially invested $75 million in the project, confirmed that his tokens had been frozen after he transferred some holdings to other wallets, which triggered further scrutiny [3]. The project has not responded to requests for comment on these incidents, despite its public claims of promoting financial freedom and decentralized governance. Galaxy Digital analysts identified over 200 investor addresses with frozen WLFI tokens, raising concerns about the extent of centralized control within a project that markets itself as community-driven.

The governance structure of WLFI is designed to gradually decentralize control over the project, with token holders theoretically able to influence its direction. However, the recent actions by the WLFI team, including locking wallets and restricting transfers, highlight a disconnect between the project’s public narrative and its operational reality. Alex Thorn of Galaxy Digital noted that WLFI’s governance model appears to centralize authority, contradicting its stated goals of community empowerment [2]. The situation has also drawn attention to the broader implications of blacklisting in the crypto space, a practice more commonly associated with stablecoins and law enforcement compliance rather than governance tokens.

The Trump family’s involvement in WLFI has raised additional questions about potential conflicts of interest, particularly given the administration’s regulatory stance toward the crypto industry. Sun, a prominent figure in the crypto world, has faced prior regulatory scrutiny from the U.S. Securities and Exchange Commission (SEC), and his close ties to the Trump family have drawn criticism from financial observers [3]. The project has become a focal point for debates about the intersection of politics, regulation, and decentralized finance, with critics arguing that the Trumps' embrace of crypto represents an opportunistic financial strategy rather than a genuine commitment to decentralization.

The unfolding saga underscores the growing challenges of governance and compliance in crypto projects. While WLFI markets itself as a decentralized platform, the recent freezing of tokens by its team highlights the risks of centralized control mechanisms within the industry. As the situation develops, investors and observers will be closely watching whether the project can reconcile its stated values with the actions of its operators. The WLFI token’s market performance and regulatory developments will also shape the broader perception of the Trump family’s foray into blockchain-based finance.

Source:

[1] Crypto dev claims Trump-linked WLFI 'stole' his money (https://cointelegraph.com/news/developer-trump-wlfi-stealing-tokens)

[2] Trump family crypto project breaks with key billionaire partner (https://www.axios.com/2025/09/05/trump-justin-sun-world-liberty-financial)

[3] Top Trump crypto backer Justin Sun says his World Liberty tokens unreasonably frozen (https://www.reuters.com/business/finance/top-trump-crypto-backer-justin-sun-says-his-world-liberty-tokens-unreasonably-2025-09-05/)