Slow Rug? Trump-Associated World Liberty Fi Accused Of Value Extraction

Overview

World Liberty Financial (WLFI), a decentralized finance (DeFi) project associated with the Trump brand, is facing serious allegations of value extraction following a governance vote that raised concerns about its integrity. A prominent trader has highlighted issues regarding the voting process and the potential implications for WLFI holders.

Governance Vote Controversy

The governance vote at World Liberty Financial has come under scrutiny after a trader, who claims to be the top-ranked trader on Bybit, accused the project of facilitating a “slow” extraction of value from its holders. The trader, known as DeFi^2 on X, indicated that wallets linked to the project’s team and strategic partners were able to push through a proposal while many public holders were unable to access or vote with their tokens.

DeFi^2 described the governance vote as potentially rigged, noting that many of the top votes appeared to come from team or partner wallets, as identified by Bubble Maps. In contrast, genuine voters were reportedly locked out of their WLFI tokens since the Token Generation Event (TGE) and could not participate in the voting process until the team allowed it. This situation raised alarms about the fairness of the governance process.

The proposal in question is referred to as the “USD1 growth proposal.” While it may seem innocuous at first glance, DeFi^2 pointed out that the governance sequencing raises questions. He questioned why the team would prioritize this vote over a proposal for unlocking WLFI tokens that the majority of holders had been requesting.

Economic Structure Concerns

DeFi^2 has expressed concerns regarding the economic structure of WLFI, claiming that holders are not entitled to any protocol revenue. According to the project’s “Gold Paper,” a significant portion of the protocol’s revenue is allocated to the Trump family and the Witkoff family, with 75% going to the Trump family and 25% to the Witkoff family. This distribution creates a scenario where the team may be incentivized to push through votes that primarily benefit themselves at the expense of locked holders.

The trader alleged that the outcome of the vote was influenced late in the process, suggesting that the proposal was initially failing until the team and partners intervened to ensure its passage. He pointed out that the WLFI team is allocated a substantial percentage of tokens, specifically 33.5%, while strategic partners hold another 5.85%. In contrast, the public sale was allocated only 20%.

Post-vote analysis revealed concerning on-chain activity, including significant transfers of WLFI tokens, while investor allocations remained locked. This raised further questions about the project’s financial practices and governance integrity.

From Author

The situation surrounding World Liberty Financial highlights the ongoing challenges in the DeFi space, particularly regarding governance and transparency. As projects continue to emerge, the need for robust governance mechanisms becomes increasingly critical to protect the interests of all stakeholders involved. The allegations raised by DeFi^2 serve as a reminder of the potential pitfalls that can arise when governance processes lack transparency and inclusivity.

Impact on the Crypto Market

• Allegations of governance manipulation can lead to decreased trust in DeFi projects, impacting investor sentiment.
• The situation may prompt regulatory scrutiny on similar projects that lack transparency in their governance processes.
• A decline in WLFI’s perceived value could lead to broader market implications for tokens associated with high-profile brands.
• Increased awareness of governance issues may spur investors to demand more accountability and transparency from DeFi projects moving forward.
• The controversy may encourage other DeFi projects to reassess their governance structures to avoid similar pitfalls.