Justin Sun has secured a procedural victory in his legal dispute with World Liberty Financial (WLFI) after a California federal judge rejected the company's attempt to move Sun's individual claims into confidential arbitration.
Judge James Donato ruled that Sun's personal claims will remain in public court. The ruling does not determine whether Sun's allegations are valid, but it ensures the proceedings will continue through the public court system rather than behind closed doors.
Sun's Allegations and WLFI's Response
Sun claims he invested $45 million in WLFI and alleges that the project's smart contracts grant the ability to freeze, restrict, or burn tokens. He stated that these controls were used against his wallet and raised similar concerns regarding USD1, WLFI's stablecoin, describing the features as backdoor functions.
Additionally, Sun questioned whether WLFI holds sufficient funds to cover potential claims, arguing that assets backing USD1's reported $4 billion market capitalization belong to users and should not be treated as company capital.
WLFI has denied Sun's allegations, with co-founder Zach Witkoff calling them entirely meritless. WLFI has also filed a counterclaim in Florida accusing Sun of defamation and improper transfers, while continuing to pursue business expansion including a new chief business officer for USD1 and an artificial intelligence partnership with WorldClaw.
Additional Claims and Developments
Separately, crypto investigator Hunter Biden alleged that WLFI seized a $75 million investment from Sun and borrowed $75 million using its own token as collateral, comparing the alleged structure to circular leverage associated with the collapse of FTX.
Biden also pointed to WLFI's reported preliminary conditional approval from the Office of the Comptroller of the Currency to become a national trust bank, an Abu Dhabi-linked entity's reported 49% stake in WLFI, and a separate UAE-based fund's reported $100 million investment. These claims remain unestablished allegations.
