WLFI, the crypto token tied to Trump-backed World Liberty Financial, plunged about 12% in the past 24 hours to a record low after the project published a thread on X defending a large lending position it holds on Dolomite, a DeFi lending protocol whose co‑founder serves as an advisor to WLFI.
The controversy stems from CoinDesk reporting that WLFI had posted its own governance token as collateral, borrowed stablecoins against that collateral, and effectively drained Dolomite’s USD1 lending pool so severely that other depositors were unable to withdraw. When asked for comment, WLFI did not dispute the on‑chain transactions. Instead, the team pointed to a social post published after the story, arguing the position was intentional and framed as beneficial.
WLFI described itself as an “anchor borrower,” saying its borrowing activity generates yield for other users at a time when traditional markets are offering little return. The team also said it would add more WLFI tokens as collateral to avoid liquidation — a move that critics say highlights the underlying problem rather than resolving it. Adding more WLFI to back a position denominated in WLFI on a protocol advised by a WLFI adviser raises a clear circularity concern for investors.
The project disclosed $65.58 million in open‑market buybacks over the past six months — 435.3 million WLFI tokens purchased at an average price of $0.1507. WLFI’s token is currently trading roughly 48% below that buyback average, leaving the treasury’s recent purchases substantially underwater. The token has now fallen to its lowest level since its 2025 launch.
Compounding the situation, three billion WLFI tokens sit in an intermediary wallet after treasury transfers on April 2 and April 7. That stash is worth roughly $234 million at current prices, down from about $266 million a week ago.
The mechanics make the risk self‑reinforcing: lower prices reduce borrowing power per token, forcing either more WLFI to be posted as collateral or less stablecoin to be borrowed. If more tokens are funneled into Dolomite to sustain the position, the protocol’s near‑depleted lending pool will become even harder for other users to access. Meanwhile, the collateral backing the position becomes increasingly concentrated in a token that just lost double‑digit value in a single day.
WLFI said it will post a governance proposal next week to unlock tokens for early holders — an update the market will likely watch closely as questions about collateral concentration, advisor conflicts, and liquidity on Dolomite remain unresolved.
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