The USD1 pool utilization rate once hit 100% and currently remains as high as about 93%, leaving depositors facing withdrawal difficulties.
Written by: ChandlerZ, Foresight News
On April 9, CoinDesk reported that World Liberty Financial (WLFI), a crypto project co-founded by the Trump family, conducted multiple collateralized lending operations via the DeFi lending protocol Dolomite, sparking market concerns about insider relationships, circular financing, and liquidity risks. WLFI used approximately 5 billion WLFI tokens as collateral on Dolomite to borrow a total of about $75 million in stablecoins, with over $40 million flowing to Coinbase Prime, presumably for fiat conversion or over-the-counter (OTC) transactions.
Two Months, Five Transactions, A Complete Capital Chain
In terms of specific operations, on February 8, the WLFI treasury deposited 14 million USD1 tokens as collateral on Dolomite and borrowed 11.4 million USDC. A few minutes later, 11.45 million USDC was transferred to a Coinbase Prime deposit address. Coinbase Prime is typically used for crypto-to-fiat conversions or institutional OTC transactions.
Two days later, WLFI directly transferred another 12.5 million USD1 tokens from its treasury to another Coinbase Prime address. This fund did not go through Dolomite lending; instead, it sent its own issued stablecoin directly to a fiat exit.
On February 20, WLFI tokens entered the scene. The treasury deposited 890 million WLFI tokens into Dolomite and borrowed 20 million USD1. On March 24, it added another 1.1 billion WLFI tokens. In total, 1.99 billion WLFI tokens were locked as collateral on Dolomite, and the treasury obtained approximately $31.4 million in stablecoins from the protocol.
In April, the scale escalated again. On April 2, the WLFI treasury transferred 2 billion WLFI tokens to a Gnosis Safe proxy wallet (address: 0x44a681DD); on April 7, another 1 billion was transferred. These 3 billion tokens are worth approximately $266 million at current prices, but they did not directly enter Dolomite, and their destination remains unclear.
Including all lending and direct transfers through various channels, WLFI has mobilized approximately $75 million in stablecoins via Dolomite and Coinbase Prime.
The choice of this protocol is not accidental. Public information shows that Dolomite co-founder Corey Caplan also serves as an advisor to WLFI, and WLFI's lending platform "WLFI Markets" is built on the Dolomite protocol. In other words, WLFI borrowed its own issued stablecoins on a protocol co-created by its advisor, using its own issued tokens as collateral.
In traditional finance, such related-party transactions require information disclosure and approval by independent directors. However, in this case, these firewalls are almost non-existent.
Depositors' Liquidity Is Squeezed
WLFI currently accounts for about 55% of the $458.9 million in supplied liquidity on Dolomite's entire platform, with the total platform supply being $835.7 million.
Specifically for the USD1 pool, out of the $180 million in supply, $167.5 million has been borrowed, resulting in a utilization rate of about 93%. Only about $12.5 million in available liquidity remains in the pool, making it practically difficult for large depositors to withdraw their funds in full. The pool's utilization rate once hit 100%.
The USD1 supply rate is 16.24%, and the borrowing rate is 9.18%. This set of rates reflects concentrated lending activity dominated by a single large borrower, rather than widespread organic demand.
Risks on the collateral side are equally prominent. The WLFI token has extremely limited market depth, with daily trading volume far lower than the collateral size. If a sharp price drop triggers Dolomite's liquidation mechanism, forced selling will crash the token price before the collateral can be unwound, and the resulting bad debts will ultimately be borne by ordinary depositors who cannot exit currently.
This Isn't the First Time: From "Spy Chief" to Sanction Links
Dolomite lending is just the latest link in WLFI's conflict-of-interest chain.
According to The Wall Street Journal, company documents and insiders revealed that four days before Trump's inauguration, a confidant of an Abu Dhabi royal family member secretly signed an agreement with the Trump family to acquire 49% of the Trump family's crypto project World Liberty Financial for $500 million. The buyer would prepay half of the amount, $187 million, directly into Trump family entities.
The transaction was backed by Abu Dhabi Prince Sheikh Tahnoon bin Zayed Al Nahyan, who has been pushing the U.S. to allow him to obtain tightly controlled AI chips. Often called the "Spy Prince," he is the brother of the UAE President and National Security Advisor, and also leads the country's largest wealth fund, managing over $1.3 trillion in assets.
Documents show that of the first $250 million investment from Aryam Investment 1, a company supported by Tahnoon, $187 million flowed to two Trump family entities: DT Marks DEFI LLC and DT Marks SC LLC. In addition to payments to Witkoff family entities, another $31 million flowed to entities linked to co-founders Zak Folkman and Chase Herro.
Under the agreement, Aryam would become World Liberty's largest shareholder and the only known investor besides the founders. The agreement also arranged for two Aryam executives (who are also executives at Tahnoon's G42 company) to join World Liberty's five-member board, which at the time included Eric Trump and Steve Witkoff's son Zach Witkoff.
Steve Witkoff's wealth soared by 15% in 2025 to $2.3 billion, compared to an estimated $2 billion when he first started working for the government. WLFI was the main driver; his family has earned at least $200 million from token sales and related transactions. According to House Democrats, the Office of Government Ethics has not signed off on Witkoff's financial disclosure documents for seven months.
In addition, WLFI's stablecoin USD1 had a partnership with the Southeast Asian blockchain project AB DAO, which was previously linked to Cambodia's Prince Group. Chen Zhi, the head of Prince Group, was sanctioned by the U.S. and UK in November 2025 over large-scale cyber fraud allegations, and the U.S. Department of Justice seized approximately $12.7 billion in Bitcoin in related actions. WLFI responded that it was unaware of AB DAO's past associations.
On February 23, USD1 temporarily depegged to $0.994, with $270 million flowing out in panic. WLFI claimed it was the target of a "coordinated attack," including the hacking of a co-founder's X account, hiring KOLs to spread panic, and shorting WLFI tokens, but it never provided any technical evidence.
On-chain data also shows that WLFI transferred approximately 3 billion tokens to multiple addresses in early April, with a nominal value of about $266 million; their destination remains unclear. Amid multiple controversies, the WLFI token price has now dropped to $0.0858, its lowest since launch.
WLFI's Response: No Liquidation Risk
On April 10, WLFI tweeted in response to market questions about its lending positions on WLFI Markets, stating that it is currently one of WLFI Markets' largest suppliers and borrowers. It borrows stablecoins using WLFI as collateral, but there is no liquidation risk, and it can add collateral at any time even if the market fluctuates significantly.
In terms of data, WLFI disclosed that USD1's current annualized revenue is approximately $159.5 million, and it has repurchased about 435 million WLFI tokens in the secondary market over the past six months, totaling approximately $65.58 million. The project also stated that it will propose a governance proposal next week to discuss unlocking early locked tokens and upgrading USD1's features, including supporting gas-free transfers and adapting to AI payment infrastructure.
USD1 currently has a market capitalization of approximately $4.3 billion and ranks high in the stablecoin market. WLFI's response attempts to shift the narrative from "conflict of interest" to "business growth," but it does not answer: as the largest borrower in the lending pool, how does WLFI ensure it will not cause losses to ordinary depositors under extreme market conditions? When Dolomite's co-founder is also a WLFI advisor, who guarantees the protocol's risk control independence?
Currently, neither Dolomite nor WLFI has explained the governance process for related-party transactions.