World Liberty Financial (WLFI), the DeFi project backed by Donald Trump's family, is pushing back against widespread criticism of its borrowing activity on Dolomite, the Arbitrum-based DeFi lending protocol. The project deposited roughly 5 billion of its own WLFI governance tokens as collateral to borrow approximately $75 million in stablecoins, a move that has locked up liquidity for ordinary depositors and driven the USD1 lending pool to near-total utilization. In a statement issued April 9, WLFI called the concerns "misinformation" and said liquidation risk is not a factor. Outside observers and reporters have characterized the response as a dismissal of "FUD" (fear, uncertainty, and doubt).

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What Happened On-Chain

Between February and early April 2026, WLFI executed a series of on-chain transactions that gradually built a dominant borrowing position on Dolomite's WLFI Markets platform. On February 8, the project deposited 14 million USD1 and borrowed 11.4 million USDC, which it then routed to Coinbase Prime. On February 10, WLFI sent an additional 12.5 million USD1 directly to Coinbase Prime. On February 20, it deposited 890 million WLFI tokens and borrowed an additional 20 million USD1. On March 24, WLFI deposited a further 1.1 billion WLFI tokens. Between April 2 and 7, the project transferred approximately 3 billion additional WLFI tokens through a Gnosis Safe multisig wallet at address 0x44a681DD.

In total, WLFI sent more than $40 million in borrowed stablecoins to Coinbase Prime across multiple transactions. WLFI has not provided a public explanation for routing those borrowed funds to Coinbase Prime, and no stated rationale was available at the time of publication.

The collateral WLFI deposited now represents roughly 55 percent of total supplied assets on the WLFI-branded Dolomite market. That market holds $835.7 million in total value locked, a figure specific to the WLFI Markets sub-protocol. Dolomite's broader protocol TVL is approximately $289 million, according to DefiLlama.

The USD1 lending pool reached utilization rates of approximately 93 percent and above, with reports indicating that utilization exceeded 100 percent at peak, creating conditions of negative liquidity. At those utilization levels, depositors cannot withdraw funds simultaneously on demand. Deposit rates spiked to 35.81 percent APR as the pool tightened, while borrowing costs hit 30 percent, both figures far outside the normal range for a dollar-pegged stablecoin pool.

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A Structural Conflict of Interest

The arrangement has attracted criticism beyond the liquidity concern itself. Dolomite co-founder Corey Caplan also serves as an advisor to World Liberty Financial. WLFI launched its dedicated lending platform, WLFI Markets, on Dolomite's Arbitrum-based infrastructure in January 2026.

The result is a situation in which WLFI is borrowing its own USD1 stablecoin from user-funded pools, through a protocol co-founded by one of its own advisors.

CoinDesk described the arrangement as raising "concerns about circular economics and the use of user-funded pools to finance a single insider borrower." Analysts at CryptoRank noted that peak pool utilization above 100 percent creates negative liquidity, leaving USD1 depositors uncertain about when they would be able to access their funds.

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WLFI's Response

In its official statement, WLFI acknowledged being one of the largest borrowers on the platform but argued the position is far from its liquidation threshold. The project said it has capacity to post additional collateral in the event of an adverse price move. WLFI also reported that USD1's annualized income on the platform reaches approximately $159.5 million; that figure is self-reported and has not been independently verified.

WLFI also announced a completed token buyback of 435.3 million WLFI tokens totaling $65.58 million, purchased at an average price of $0.1507 per token. That average buyback price sits roughly 58 to 70 percent above WLFI's current trading range, a gap that raises questions about the buyback's effectiveness as a market confidence measure. Additionally, the project said it plans to submit a governance proposal to unlock WLFI tokens for early holders.

The buyback announcement came as WLFI's token price fell roughly 10 percent to a record low following public scrutiny of the borrowing position. As of April 10, WLFI trades between $0.0888 and $0.0955, with a market cap near $2.94 billion and approximately 31 billion tokens in circulation out of a total supply of 100 billion. The approximately 5 billion WLFI tokens deposited as collateral on Dolomite represent roughly 16 percent of the circulating supply, a concentration relevant to both the liquidation risk debate and the proposed governance unlock of additional tokens.

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Regional Stakes: Pakistan and Emerging Markets

The instability in WLFI's DeFi position carries direct implications for Pakistan. In January 2026, SC Financial Technologies, described in published reports as an affiliate of World Liberty Financial, signed an agreement with Pakistani authorities to explore using USD1 for cross-border remittances. USD1, which carries a circulating supply of approximately $4.6 billion and is backed by short-term U.S. Treasuries and cash, has been positioned as a stable payments instrument for emerging-market corridors. Pakistan receives more than $36 billion annually in overseas worker remittances, placing it among the world's top recipients. Officials framed the USD1 corridor as a way to cut transfer fees and reduce settlement times. The State Bank of Pakistan said any integration would require reserve transparency and transaction monitoring, conditions for which USD1's Treasury-backed structure is directly relevant.

A liquidity constraint on a major DeFi lending pool tied to USD1 complicates the picture for a country weighing whether to route remittance flows through it. Confidence in USD1 as a payments instrument depends partly on the perceived stability of the broader WLFI ecosystem, and the current situation introduces uncertainty on that front.

More broadly, DeFi users across Sub-Saharan Africa, including in Nigeria, Kenya, Ghana, and South Africa, where USD-pegged stablecoins serve as practical instruments for trade settlement and savings, and users across South Asia who deposited USD1 on Dolomite to earn the advertised 35 percent annual yield, are facing constrained access to their funds. CryptoRank has described the situation as a potential withdrawal freeze: at current utilization levels, depositors cannot all exit simultaneously, and whether any individual depositor can withdraw at a given moment depends on available liquidity at that time.

The Corey Caplan dual role also underscores a persistent governance concern in DeFi. When a protocol's co-founder also advises the dominant borrower on that same protocol, depositors have limited structural recourse if the interests of the borrower and the depositor base diverge. This observation reflects Verse Press analytical commentary: formal protections for depositors remain underdeveloped in DeFi protocols where such insider relationships are not disclosed in advance.

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What to Watch

The situation will likely hinge on whether WLFI's governance proposal passes and whether the project begins repaying or reducing its borrowing position. The proposed governance measure would unlock WLFI tokens for early holders; WLFI has not publicly explained how, or whether, that proposal directly addresses the pool's liquidity constraints, and the connection between the token unlock and the utilization crisis remains unclear. Until the USD1 pool's utilization falls to a level where withdrawals become liquid again, depositors remain constrained. The project's next on-chain moves will determine whether its claim of no liquidation risk holds or whether further token price pressure forces its hand.

The dual role of Corey Caplan as both Dolomite co-founder and WLFI advisor may also invite broader governance scrutiny. Whether any formal review of that conflict of interest has been initiated by Dolomite's community governance structures, WLFI stakeholders, or external regulators has not been confirmed, and it remains a key variable for the protocol's credibility in the months ahead.