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Warren, the top Democrat on the Senate Banking Committee, wrote to SEC Chairman Paul Atkins on May 14 asking his agency to check if World Liberty Financial misled people who bought its tokens or broke securities rules.
The company is run by President Donald Trump and his sons.
“The SEC must be willing to enforce the law even when potential wrongdoers include those with powerful political connections,” Warren said in her letter.
She added that protecting regular investors matters just as much as “shutting down the President and his family from profiting off of cryptocurrency while in office.”
$75 million deal raises red flags
Her suspicions come from a WLFI deal happened in early April in which the company took out a $75 million loan. In exchange $440 million worth 5 billion WLFI tokens were put in as backup. $65.4 million were borrowed in World Liberty Financial’s own stablecoin USD1 while $10.3 were in USDC. The deal was done through a lending platform, Dolomite. Its run WLF’s advisor and tech chief, Corey Caplan.
The problem is that the regular investors arent allowed to sell these same tokens.
The WLFI tokens were down to their lowest with 10% drop as the news of the deal got out. The deal was so big that people who had put their money in Dolomite for interest were unable get cash out.
After some days, the announcement by World Liberty Financial revealed new schedule for when token owners could sell. Under these new terms, nobody would be able to sell for at least a couple of years. Warren said that many investors had not seen it coming. They faced an unfair choice. Agree to rules they didn’t like, or say no and stay locked indefinitely under prior terms, effectively removing any clear path to liquidity.
Warren wrote that early investors can’t touch 80% of what they own, and they’re watching the market move against them without being able to do anything about it.
This all happened as the Senate Banking Committee was getting ready to vote on the Clarity Act which has now passed. It’s a major bill to create clear rules for how digital currencies should be regulated.
Warren wanted the bill to include specific rules stopping government officials and their families from making money off crypto while in office. Warren’s efforts were in vain.
Billionaire investor files fraud lawsuit
The Trump crypto company is already facing legal trouble from another direction as reported by Cryptopolitan. Back in April, cryptocurrency billionaire Justin Sun filed a lawsuit in California federal court. Sun claims World Liberty Financial stopped him from selling tokens worth as much as $1 billion.
In his lawsuit, Sun says the company tried to push him into putting hundreds of millions of dollars more into their digital dollar project. When he said no, they froze his tokens, according to the complaint. Sun bought $45 million worth of tokens early on and says he was one of their biggest supporters.
Sun also claims the company quietly changed the rules about who could sell tokens, giving itself power to block certain people from trading. “There was no governance proposal (let alone a vote of token holders) on whether World Liberty should have this power,” his lawsuit says.
World Liberty Financial’s CEO Zach Witkoff called Sun’s claims “entirely meritless” on social media. Eric Trump, one of the company’s co-founders, also dismissed the lawsuit.
Sun says the tokens only brought in $22 million in their first month, but after he invested his $45 million, other investors joined in and the company eventually raised around $550 million.
But once the tokens became tradable on September 1, he couldn’t sell them, according to his lawsuit. Since then, WLFI tokens have lost about 25% of their value.
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