Legal Dispute Moves Forward in Federal Court
TRON founder Justin Sun has warned investors regarding the risks he believes are associated with World Liberty Financial (WLF) and its stablecoin, USD1. Sun's recent statements follow a court appearance in a California federal court, where WLF sought to move the dispute into private arbitration and seal certain documents.
Sun opposed the request, arguing that the case should remain publicly accessible. According to Sun, the court agreed that the case belongs in open court, though the judge also requested that both parties discuss which company-related claims should remain in federal court and which should proceed through arbitration.
Investment History and Backdoor Allegations
Sun was one of WLF's earliest and largest investors, having invested $45 million in exchange for WLFI tokens. However, he alleges that World Liberty secretly embedded a backdoor into the WLFI smart contract, granting the project unilateral power to freeze, restrict, and burn any holder's tokens without notice or due process.
Sun claims that WLF used this capability against his own WLFI tokens, resulting in an unlawful seizure of property, and that he was threatened with criminal referrals when attempting to exercise his legal rights. After filing the lawsuit, Sun obtained a court order preventing WLF from burning, destroying, reallocating, or permanently disposing of his tokens. Furthermore, Sun claims that USD1 possesses administrative controls that could similarly allow WLF to freeze or potentially destroy tokens.
Prior Allegations and Defamation Lawsuit
This dispute follows earlier events involving the two parties. In April 2026, Sun alleged that WLF deposited approximately 5 billion WLFI tokens as collateral on Dolomite and borrowed at least $75 million in stablecoins, including USD1. In response, WLF filed a defamation lawsuit against the billionaire investor in May 2026. Sun continues to urge caution regarding both the WLFI tokens and the USD1 stablecoin.
