Tron Founder Sun Yuchen Sues World Liberty Financial, Citing Frozen WLFI Tokens and Alleged Fraud

Tron founder Sun Yuchen has filed suit against World Liberty Financial (WLF) in U.S. federal court, alleging he was lured into a deal that left him with frozen tokens, stripped voting rights and massive losses. In a complaint filed April 22 in the U.S. District Court in San Francisco, Sun claims WLF made him "the primary target of its fraudulent scheme," causing "hundreds of millions of dollars in losses" to him and his company. The filing also alleges WLF is "on the brink of collapse" and "severely insolvent," and that it intends to route "95%" of token-sale proceeds to insiders. Sun's investment traces back to late 2024, when WLF launched sales of its WLFI governance token to muted demand, raising only $22 million in the first month. Sun says he stepped in with an initial $30 million investment, later increased by $45 million, and received an additional 1 billion WLFI tokens as advisory compensation, putting his total exposure at roughly $75 million. He became the largest publicly known investor, and after his entry other buyers followed; WLF ultimately raised about $550 million. WLF later publicly credited Sun with helping revive momentum. At the time, the U.S. Securities and Exchange Commission was pursuing Sun, accusing him of market manipulation, selling unregistered securities and paying celebrities to promote projects without disclosure. After President Donald Trump took office in January 2025, the SEC voluntarily paused the case. In March 2026, the parties reached a $10 million settlement, with Sun admitting no wrongdoing. According to the lawsuit, the relationship with WLF deteriorated in 2025 as the project repeatedly pressed Sun to invest more, including urging him to mint WLF's USD1 stablecoin on the Tron network. Sun refused, and by July 2025 the partnership had collapsed. The complaint says WLF then took steps that effectively trapped Sun's position. In August 2025, WLF amended the WLFI token smart contract to add a "blacklist" feature that allows the team to freeze any holder's tokens without notice, stated cause or a governance vote. A month later, when Sun attempted to transfer his WLFI, his wallet was blacklisted, freezing about $107 million worth of governance tokens and removing his voting rights. The filing adds that WLF threatened to "burn" his tokens, permanently destroying them. Sun says he tried to resolve the dispute "in good faith" but was rebuffed, prompting the lawsuit. In a post on X, he wrote that WLF "left me no choice but to take it to court." Zach Witkoff, WLF's CEO, rejected the allegations as "completely unfounded" and said Sun engaged in "misconduct," forcing WLF to act to "protect itself and its users." WLF did not specify what conduct it was referring to. WLF markets itself as a decentralized finance project offering a governance token (WLFI), a stablecoin (USD1) and DeFi lending products. Critics, including Sun, argue the structure functions more like a profit conduit. The Trump family receives 75% of net proceeds from WLFI token sales, according to the newsletter's description. By December 2025, the family had reportedly realized $1 billion in profit from the sale while still holding unsold tokens valued at $3 billion. The reserves backing USD1 are invested in U.S. Treasury securities, and the interest income is said to flow to Trump-affiliated entities. Based on a $4.2 billion market capitalization and prevailing Treasury yields, the stablecoin could generate about $160 million in annual income, according to the figures cited. Another major deal cited involves an investment entity affiliated with Sheikh Tahnoon bin Zayed of Abu Dhabi acquiring a 49% stake in WLF for $500 million in January 2025, four days before Trump's inauguration. The agreement was signed by Eric Trump. Of that amount, $187 million allegedly went to Trump-controlled entities and at least $31 million to entities associated with the Witkoff family. Zach Witkoff's father, Steve Witkoff, serves as U.S. special envoy to the Middle East. Senator Elizabeth Warren called the arrangement "outright corruption," and the House launched an investigation. Trump said he was "unaware" of the transaction. In early 2026, on-chain data showed WLF deposited 500 million of its own WLFI tokens as collateral on the DeFi lending platform Dolomite and borrowed about $75 million in stablecoins. More than $40 million was then sent to Coinbase Prime, a flow that often indicates conversion into fiat. Dolomite cofounder Corey Caplan is also an advisor to WLF. The borrowing pushed Dolomite's USD1 lending pool utilization rate to 100%, leaving ordinary depositors unable to withdraw funds. WLF's collateral reportedly represents 55% of Dolomite's total value locked. WLF said it served as an "anchor borrower" that created attractive yields. On April 12, Sun publicly accused WLF of treating users like "personal ATMs," calling himself the "first and largest victim." Three days later, WLF published a governance proposal. The April 15 proposal, labeled "Governance Restructuring," sets a new unlock schedule for 6.228 billion WLFI tokens, or 62% of total supply, according to the text. It also states that the 45.2 billion WLFI held by founders, team members and advisors would face a 10% burn (about 4.5 billion tokens), followed by a two-year lockup and a three-year linear vesting schedule. Tokenholders who do not accept the new terms would have their tokens frozen indefinitely. Sun called the proposal "one of the most absurd governance scams I've ever seen," but says he cannot vote against it because his tokens are frozen. Concentration of voting power is a central issue in the dispute. In a USD1 governance vote that passed in January 2026, the top nine wallets controlled nearly 60% of voting power, according to the cited data. WLFI's market performance has deteriorated sharply. The token peaked at $0.46 in September 2025, then fell steadily to an all-time low of $0.0767 on April 11, an 84% drop. WLFI is currently trading around $0.078, still down roughly 84% from the peak. For early buyers near $0.015, paper gains remain. For Sun, the lawsuit argues, the position built from a $75 million commitment once exceeded $1 billion in value but is now frozen and could be permanently destroyed. The newsletter notes the irony that Sun is not a sympathetic figure: he previously faced SEC accusations of market manipulation and fraud, and his investment timing coincided with regulatory pressure. The dispute, it argues, highlights the gap between WLF's decentralization claims and a system where smart-contract controls can freeze holders, governance influence is concentrated in a handful of wallets, and insiders can borrow against self-issued assets. In his original X post, Sun said "certain individuals" on the WLF team were operating contrary to President Trump's values. Even in the lawsuit, the filing reportedly distinguishes between "President Trump" and "certain individuals on the project team." A key question now is how a court will classify WLFI. If WLFI is deemed a security, the complaint argues, actions such as amending contracts without a vote and freezing holders' assets could fall under federal securities fraud. Scrutiny is also building around USD1 reserve adequacy, the unresolved risks in Dolomite's lending pool and the continuing House investigation. The Trump family has already reportedly cashed out more than $1 billion. Sun's convertible bonds have an earliest maturity window in 2027, and court scheduling could take more than a year. Over that period, additional WLFI tokens are expected to unlock, while holders face the choice described in the proposal: accept the new terms or remain frozen indefinitely.