By danny X, @agintender
WLFI is a project that combines political branding with decentralized finance. Led by the Trump family, it has a highly centralized structure. It rapidly amplifies its valuation through a capital circulation scheme with ALT5 and employs a token model with low circulation and high FDV. While attracting institutional and crypto capital participation, it also carries risks related to technical security, centralized governance, and potential regulatory oversight.
1. Project Origin: Trump Family’s Road to DeFi
From the day it was founded, World Liberty Financial has deeply tied its core values to Trump's political brand, demonstrating that its strategic intention is not technological innovation, but to leverage its strong brand identity for market penetration and capital raising.
1.1. Vision and Mission: “Financial Democratization” and Political Narrative
World Liberty Financial officially debuted to the public in September 2024, with its official positioning explicitly stating that the project was "inspired by President Donald Trump's vision." This branding was no accident; it formed the project's core unique selling point. Its publicly stated mission was to "democratize DeFi" by creating user-friendly tools, aiming to attract mainstream Web2 users and promoting the slogan "Make Crypto and America Great Again." This politically charged propaganda portrayed WLFI as an "anti-establishment" movement against the "rigged" traditional financial system.
1.2. Core Leadership and Operations Team
The Trump family's involvement is direct and official. According to project documents, Donald Trump himself serves as "Chief Cryptocurrency Advocate," while his sons, Donald Trump Jr. and Eric Trump, serve as "Web3 Ambassadors." Even his 18-year-old son, Barron Trump, has been given the title of "Chief DeFi Visionary." Could this be the so-called father-son partnership?
The project's day-to-day operations are handled by a core team of three: COO Zachary Folkman, Data and Strategy Director Chase Herro, and CEO Zach Witkoff. It's worth noting that Witkoff is the son of Trump's Middle East advisor, Steve Witkoff, though there's no political connection between the two.
1.3. Initial Strategy: Building a User-Friendly DeFi Lending Portal via Aave
The project's initial technical blueprint presented to the outside world was relatively simple. The first and only major technical solution proposed by WLFI was to launch an instance of the Aave v3 protocol. Aave is one of the most mature and battle-tested lending protocols in the DeFi space.
The core of this strategy isn't to independently develop new DeFi technology, but rather to leverage Aave's existing, robust infrastructure and liquidity pools, building a simplified, newbie-friendly user interface on top. The goal is to lower the barrier to entry for users in DeFi and thereby attract new users on a large scale. This strategy suggests that the project's initial focus will be on leveraging brand influence to quickly acquire users, rather than innovating underlying technology.
This initially relatively modest goal provides an important reference point for understanding the project's subsequent dramatic strategic shift. The initial simple and accessible lending narrative helped attract public attention and initial funding early on. However, this simple vision quickly gave way to a far more ambitious and complex plan: to build a financial empire centered around a stablecoin and a publicly listed company.
This shift suggests that the original Aave plan may have been just a "narrative beachhead"—a readily accepted story for market entry, while the truly complex and profitable financial machine was being built behind the scenes. This is not a simple business evolution, but a fundamental change in the project's core business model—from a software service provider to a complete transformation into a financial institution.
2. Investor Constellation: A Mix of Institutional, Insider, and Controversial Figures
World Liberty Financial's investor base is extremely complex, presenting a network of capital comprised of traditional financial institutions, project insiders, and controversial figures in the crypto world. This diverse capital structure, while providing funding for the project, also carries significant reputational risk.
2.1. The Trump family’s controlling stake and financial arrangements
The Trump family holds an overwhelmingly dominant position in World Liberty Financial. A Trump business entity, DT Marks DEFI LLC, holds a controlling 60% stake in the company. More crucially, this entity is entitled to receive up to 75% of all WLFI token sale proceeds. This profit-sharing model is extremely rare among startups, going far beyond typical founder equity incentives and ensuring that the vast majority of funding proceeds flow directly into the Trump family's pockets.
Public documents and market data indicate that the Trump family's WLFI token holdings are valued at over $6 billion on paper, with Donald Trump reportedly controlling approximately two-thirds of the tokens. This figure makes cryptocurrency, surpassing real estate as the Trump family's primary business interest.
2.2. Institutional Endorsement: A Cloak of Legitimacy
To establish its legitimacy in mainstream financial markets, WLFI successfully attracted the participation of several prominent institutional investors, including Point72 Asset Management, headed by billionaire Steve Cohen; Hong Kong-based Soul Ventures; and DWF Labs, which invested $25 million. The participation of these institutions lent this politically charged crypto project a veneer of traditional financial market approval, becoming a crucial asset for its external publicity and credibility.
2.3. Justin Sun’s Key Role: Investment, Advisory, and Regulatory Concerns
TRON founder Justin Sun is one of WLFI's cornerstone investors. He initially invested $30 million in the project and subsequently increased his total investment to at least $75 million. In return, Sun was appointed an official advisor to the project, and WLFI's subsequent USD1 stablecoin also chose to run on the TRON network, which he dominates.
The most striking aspect of this investment relationship is the delicate timeline of its interactions with US regulators. The SEC filed a fraud lawsuit against Justin Sun and his company. However, in February 2025, shortly after Trump took office as president, the SEC abruptly dropped the case. This decision reportedly surprised many SEC officials who had been confident of a successful outcome. This series of events—from Justin Sun's substantial investment in the Trump family business to the rapid fading of significant regulatory threats after the new US administration—has sparked widespread speculation about a potential quid pro quo.
This makes WLFI no longer just a commercial project, but a tool for exerting political influence. For investors, this means that the success or failure of the project may no longer depend on market performance or technical strength, but is closely linked to the political direction and regulatory decisions of the US government, introducing a unique and unprecedented risk that cannot be quantified.
2.4. Aqua 1 / Web3Port Controversy: Suspicious Capital
Another controversial investment came from the UAE-based Aqua 1 Foundation, which injected $100 million into WLFI. However, an independent investigation report pointed out that Aqua 1 was linked to a Hong Kong market maker called Web3Port, which was banned by several exchanges for suspected market manipulation.
https://www.theblock.co/post/362612/aqua1-web3port-world-liberty
News reports claim that Aqua 1 co-founder "Dave Lee" and Web3Port's David Jia Hua Li are the same person and that the two companies' websites share the same server infrastructure. In response to these allegations, Aqua 1 and Dave Lee publicly denied any operational connection, calling the reports "factually inaccurate." They did not specify the inaccurate information, citing "ongoing regulatory and compliance procedures."
This strategic segmentation of investor backgrounds reveals the project's complex fundraising strategy. On the one hand, the project leverages "clean" institutional capital from sources like Point72 to demonstrate legitimacy and credibility to the public and traditional markets. On the other hand, it raises substantial funds from sources with ties to controversial figures like Justin Sun and tainted entities like Web3Port.
3. Strategic Evolution: Transforming to an Ecosystem Centered on the USD1 Stablecoin
The World Liberty Financial project has undergone a crucial strategic transformation, evolving from a simple application-layer project into a vast ecosystem dedicated to building underlying financial infrastructure, with the USD1 stablecoin at its core.
3.1. From Lending Front-End to Financial Infrastructure
The project's initial narrative was to provide users with "access to third-party DeFi applications," a positioning that made it appear to be a portal or aggregator to the DeFi world. However, this narrative underwent a fundamental shift in March 2025, when the project officially announced the launch of its native stablecoin, USD1, and its commitment to building a "next-generation financial platform."
This transformation marked a quantum leap in the project’s ambition, scope, and risk profile.
3.2. USD1 Stablecoin In-Depth Analysis: Mechanism, Custody, and Growth Drivers
Mechanism: USD1 is a fiat-collateralized stablecoin pegged 1:1 to the US dollar. Its reserve assets consist of short-term US Treasury bills, US dollar cash deposits, and other cash equivalents. This is a conservative and mature stablecoin model recognized in the industry, similar to leading stablecoins such as USDC and USDT.
Custody: To enhance its credibility, USD1's reserve assets are held by BitGo, a renowned digital asset custodian. BitGo enjoys a strong reputation among institutional clients, and its involvement provides a crucial layer of security for USD1's assets.
Growth: USD1 has experienced astonishing growth since its launch. In just over a month after its launch in March 2025, its market capitalization exceeded $2.1 billion, earning it the title of “the fastest-growing stablecoin in history.”
Key Growth Driver: However, this explosive growth isn't driven by widespread organic market adoption. The vast majority of its market capitalization stems from a single, massive transaction: a $2 billion investment agreement between Abu Dhabi investment firm MGX and Binance, which specified the use of USD1 as the sole medium of exchange. A secondary driver is the activity of USD1 on the BNB Chain.
Lack of Transparency: Despite the project's commitment to regular third-party audits, as of May 2025, no public audit report or proof of assets detailing the composition of the USD1 reserve had been released. For stablecoins, reserve transparency is crucial for maintaining user confidence. Later, in June 2025, a co-founder stated that the audit report had been received and would be released soon, but this still reflects the project's lag in disclosing key information.
This strategic shift reveals the true economic role of stablecoins within the WLFI ecosystem. The WLFI token itself is clearly defined as a pure governance token, devoid of any economic rights. So, what is the engine that creates value for the business entity in which the Trump family holds a 60% stake? The answer is the USD1 stablecoin.
Similar to the business models of Tether and Circle, issuers of fiat-collateralized stablecoins can generate substantial revenue by investing their reserve assets in interest-bearing financial instruments like U.S. Treasuries. Therefore, stablecoins are not just a product of WLFI; they are the core engine that sustains the entire enterprise and generates cash flow. Shifting from a lending narrative to a stablecoin is a necessary step in building a sustainable business model for the project.
However, this growth model also carries significant risks. The so-called "fastest-growing" narrative is a product of financial engineering, not natural market selection. Its market capitalization is highly dependent on single transactions with MGX/Binance, meaning USD1's liquidity and stability are deeply tied to a very small number of institutional counterparties, creating serious systemic risks. Unlike USDC or USDT, which are integrated into thousands of protocols and widely used by millions of users, USD1's foundation is both narrow and fragile. Any fluctuation in its relationship with MGX or Binance could trigger a catastrophic collapse in its perceived value and utility.
3.3. Ecosystem Partners and Integration
To build its DeFi ecosystem, WLFI is actively partnering with other leading blockchain protocols, including Ondo Finance, Ethena, Chainlink, Sui, and Aave. Furthermore, through its "macro strategy," the project has established a diversified digital asset reserve, holding a variety of mainstream crypto assets including BTC, ETH, TRX, LINK, SUI, and ONDO.
4. ALT5 Sigma Mechanism: Building a Siphoning Tool for the Open Market
The transaction between World Liberty Financial and Nasdaq-listed ALT5 Sigma is the core of the project's financial engineering, a complex and unconventional design rarely seen in cryptocurrency or even traditional financial markets. This mechanism aims to create a tradable public market proxy for the illiquid WLFI token and establish its market valuation through a sophisticated capital loop.
4.1. Analysis of the $1.5 billion “Cryptocurrency Vault” Transaction
In August 2025, WLFI effectively completed its acquisition of controlling stake in ALT5 Sigma (ALTS), a publicly traded company that originally specialized in pain management and later transitioned to a payments technology company. The core of the transaction involved ALT5's announcement of raising $1.5 billion through a private placement and a concurrent private placement to implement a "WLFI Treasury Strategy."
As part of the transaction, WLFI's core executive team fully joined ALT5's leadership team: WLFI CEO Zach Witkoff became Chairman of ALT5's Board of Directors, and Eric Trump became a member of the Board of Directors.
4.2. Circular Flow of Capital: How WLFIs Refund Their Vaults
The ingenuity of this transaction lies in the capital circulation mechanism it designed. The specific steps are as follows:
Step 1: WLFI Exchanges Tokens for Equity. World Liberty Financial led ALT5's private placement. However, its payment was not in cash, but rather $750 million in WLFI tokens issued by the company. Through this non-cash transaction, WLFI received ALT5 shares and warrants.
Step 2: ALT5 raises cash from external investors. At the same time, ALT5 raises another $750 million in cash from other external institutional investors through a private placement.
Step 3: ALT5 uses the raised cash to repurchase WLFI tokens. Finally, ALT5 will use the $750 million in cash raised from external investors to purchase more WLFI tokens directly from World Liberty Financial to replenish its so-called "company coffers."
This process forms a perfect closed-loop capital loop: WLFI uses its own zero-cost tokens to gain control of a publicly listed company; then, the publicly listed company uses real money raised from the public market to purchase WLFI tokens. This operation not only creates real demand for WLFI tokens but also, through the trading behavior of the listed company, gives them a public market price.
4.3. Strategic Goal: Creating Valuation and Liquidity for Illiquid Assets
Prior to the ALT5 transaction, WLFI tokens were non-transferable and therefore had no market price. The ALT5 transaction marked the first official valuation of WLFI tokens—$0.20 per token. This price was set independently by the two parties (effectively controlled by the same party), but because it occurred within the framework of a publicly traded company, it created a significant paper wealth for insiders holding billions of tokens.
This structure mimics MicroStrategy's strategy of transforming the company into a Bitcoin proxy stock. It effectively turns ALTS stock into a publicly traded proxy for the WLFI token. Investors can indirectly gain exposure to WLFI by purchasing ALTS stock, thus addressing the early liquidity issue of the WLFI token.
This mechanism is a perfect blend of regulatory arbitrage and financial alchemy. Its core lies in leveraging regulated public markets to back and price an unregulated cryptoasset. By orchestrating a transaction in which a Nasdaq-listed company acquires WLFI tokens at a specific price, the project creates a verifiable valuation, even one that requires SEC filings. This is a true example of financial alchemy: transforming a self-issued, illiquid digital token into an asset with verifiable paper value that can then be used as collateral, included on balance sheets, or as the basis for further financing.
Former SEC officials have issued serious warnings about this transaction, noting that its inherent conflict of interest "brings the worst practices of the crypto ecosystem into the regulated public markets." However, from the project's perspective, this conflict of interest is not a vulnerability but a core feature of the mechanism's design. Because the same individuals control both the seller (WLF) and the buyer (ALT5), they can dictate the terms of the transaction entirely to their own advantage. This is not a fair transaction but a carefully choreographed show designed solely to achieve specific financial objectives for WLF's insiders (namely, creating valuation and liquidity). This structure poses significant risks to external investors in ALTS, as their capital is being used to support an asset controlled by management with conflicted interests within the company.
https://www.mitrade.com/au/insights/news/live-news/article-3-1083176-20250901
5. WLFI Token Economics: Supply, Distribution, and Utility Analysis
The economic design of the WLFI token is riddled with contradictions and opacity, with its supply allocation and release mechanisms seemingly carefully designed to create maximum market advantage for insiders.
5.1. Total Supply and the Contradictory Distribution Model
The total and maximum supply of WLFI tokens are both 100 billion. However, there are two distinct and conflicting versions circulating in the market regarding how these tokens will be distributed:
According to a public statement by project partner Chase Herro, the token distribution plan is: 63% will be sold to public investors, 17% will be used for user rewards, and 20% will be reserved for the project team.
5.2. Token Sale Rounds and Early Investor Distribution
Through multiple token sales, the WLFI project successfully raised a total of $550 million from over 85,000 KYC-verified participants as of March 2025. However, its early sales process was not without its challenges. A sales event in October 2024 was disrupted by a website crash, raising just over $8 million, far short of its target of $300 million.
Early investors received tokens at rock-bottom prices, including rounds of $0.015 and $0.05 per token, meaning they will be sitting on significant unrealized gains once the tokens go public.
5.3. Token Release Plan: Unlocking on September 1st and Future Locking
According to the project's announcement, WLFI tokens are scheduled to begin trading on the market on September 1st. This initial unlock is specifically for early investors: 20% of the tokens they purchased in the $0.015 and $0.05 rounds will be released and made available for circulation. Notably, the delivery price of ALTS and WLFI is $0.2.
The tokens unlocked this time represent approximately 5% of the total WLFI supply. This is a critical design decision, as it ensures an extremely low circulating supply (i.e., "floating disk") during the initial launch period. Meanwhile, tokens allocated to founders, team members, and advisors will remain locked upon launch to prevent an immediate sell-off. The remaining 80% of tokens held by investors will also remain locked, with the specific release schedule to be determined by a future community governance vote.
This token release schedule is carefully designed to create a "low circulation, high FDV" market dynamic. By unlocking only a tiny portion of the total supply (approximately 5%), circulating tokens are artificially kept scarce. Simultaneously, the project's strong brand and institutional investor backing generate significant market hype, driving up its price in the futures market and overall FDV. This "low circulation, high FDV" situation is a classic breeding ground for market manipulation. Even a small amount of buy capital can trigger a dramatic increase in token prices. This price surge is extremely beneficial to insiders, as it significantly inflates the paper value of their large locked-up tokens, even if these tokens cannot be sold yet.
5.4. Utility Analysis: Pure Governance Tokens with No Economic Stake
The official positioning of the WLFI token is very clear: it is a pure governance token. Aside from the right to vote on the future direction of the protocol, holders do not receive any rights to share in protocol revenue, dividends, or other economic benefits. Its sole utility is to participate in platform governance voting.
However, this "governance" utility may be an illusion in reality. Given the massive and highly concentrated token holdings held by insiders, the outcome of any community vote is effectively predetermined. The founding team and its allies will always have enough votes to dominate any decision. Therefore, for ordinary retail investors, this "governance" function is essentially non-existent. The token's true purpose is not decentralized governance but as a tradable, speculative asset. Its value is entirely driven by market sentiment and Trump's brand, while its price dynamics are precisely managed by the project's control over the pacing of supply release.
