Post · bonfire.cafe

Newsletter: Crypto billionaire Justin Sun, who escaped fraud allegations after investing hundreds of millions of dollars into the Trump family’s crypto projects, is now accusing the Trumps’ project of fraud.

https://www.citationneeded.news/issue-105/

#crypto #cryptocurrency #USpol #USpolitics #CitationNeededNewsletter

Citation Needed

Issue 105 – The new boogeyman

A crypto billionaire who escaped fraud allegations after investing hundreds of millions of dollars into the Trump family’s crypto projects is now accusing them of fraud

#citationneedednewsletter #cryptocurrency #crypto #uspolitics #uspol

Chuckles

@celeduc@mastodon.social · 36 minutes ago

@molly0xfff not only did I run out of popcorn while reading your missive, I am concerned that it could cause an overheated popcorn market.

Ben Schorr :donor:

@bschorr@infosec.exchange · 57 minutes ago

@molly0xfff It's possible Mr. Sun didn't understand what he was actually investing in. He was investing in his freedom, not in any real financial return (though the greater fool principle may still apply).

Bribes are just a different kind of investment.

Molly White

@molly0xfff@hachyderm.io · 57 minutes ago

Last year, the Trump family’s World Liberty Financial project froze the $WLFI tokens belonging to crypto billionaire Justin Sun, their largest token investor, with little explanation. Now he’s suing them for contract violations and fraud, and they’re suing him for defamation.

#crypto #cryptocurrency #USpol #USpolitics #citationNeededNewsletter

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Sun v. World Liberty
Sun filed a May 5 lawsuit in a California federal court alleging World Liberty vindictively froze his $WLFI tokens after he refused to invest hundreds of millions of dollars more into minting the project’s stablecoin, USD1, on his Tron blockchain.2 He claims World Liberty threatened to destroy the frozen tokens and report him to US authorities — presumably the very authorities who had mysteriously dropped their investigations and lawsuits against him shortly after his substantial investments into Trump family projects [I102].

Sun alleges that World Liberty fraudulently induced investments by marketing itself as a decentralized finance platform that would free users from what the project’s CEO described as “the big boogeyman behind the curtain” of centralized control, while in fact secretly retaining the power to unilaterally freeze tokens. “Far from freeing its users of centralized control, World Liberty positioned itself as the new boogeyman behind the curtain,” the lawsuit observes with a certain dramatic satisfaction. — Sun v. World Liberty Sun filed a May 5 lawsuit in a California federal court alleging World Liberty vindictively froze his $WLFI tokens after he refused to invest hundreds of millions of dollars more into minting the project’s stablecoin, USD1, on his Tron blockchain.2 He claims World Liberty threatened to destroy the frozen tokens and report him to US authorities — presumably the very authorities who had mysteriously dropped their investigations and lawsuits against him shortly after his substantial investments into Trump family projects [I102]. Sun alleges that World Liberty fraudulently induced investments by marketing itself as a decentralized finance platform that would free users from what the project’s CEO described as “the big boogeyman behind the curtain” of centralized control, while in fact secretly retaining the power to unilaterally freeze tokens. “Far from freeing its users of centralized control, World Liberty positioned itself as the new boogeyman behind the curtain,” the lawsuit observes with a certain dramatic satisfaction.

Sun’s lawsuit also repeats his public allegations that World Liberty’s supposedly decentralized community governance is a sham. He alleges that World Liberty co-founder Chase Herro admitted in private communications that governance votes were essentially predetermined, alleging that Herro represented to him that “the World Liberty leadership team controlled a meaningful percentage of the outstanding $WLFI tokens in circulation, and would thus be able to effectively control the outcome of any such vote.”

Sun makes the dramatic claim that World Liberty is “on the brink of collapse and potential insolvency”. As proof, he points to the company’s controversial Dolomite borrowing [I104], and the parallels some have drawn to FTX’s reliance on leveraging self-issued tokens prior to its collapse, as well as the token’s ongoing price decline and World Liberty’s massive payouts to insiders. — Sun’s lawsuit also repeats his public allegations that World Liberty’s supposedly decentralized community governance is a sham. He alleges that World Liberty co-founder Chase Herro admitted in private communications that governance votes were essentially predetermined, alleging that Herro represented to him that “the World Liberty leadership team controlled a meaningful percentage of the outstanding $WLFI tokens in circulation, and would thus be able to effectively control the outcome of any such vote.” Sun makes the dramatic claim that World Liberty is “on the brink of collapse and potential insolvency”. As proof, he points to the company’s controversial Dolomite borrowing [I104], and the parallels some have drawn to FTX’s reliance on leveraging self-issued tokens prior to its collapse, as well as the token’s ongoing price decline and World Liberty’s massive payouts to insiders.

Sun notes that World Liberty has offered various explanations for freezing his tokens: that he took massive short positions responsible for $WLFI’s 40% plummet after early investors could trade, that he made straw purchases for other buyers, or that they were angered by his $100 million $TRUMP memecoin purchasea. He dismisses all these reasons as pretextual, denying the allegations that he shorted the token or made straw purchases, and claiming the real motivation was extortion and market manipulation (by preventing him from selling his large holdings, which would have driven prices down).

Snorri

@SnorriSturluson@social.tchncs.de · 56 minutes ago

@molly0xfff Wait, how were they able to "freeze" anything?

Molly White

@molly0xfff@hachyderm.io · 48 minutes ago

@SnorriSturluson there is a function on the $WLFI smart contract that enables World Liberty to prevent any holder from transferring their tokens. They also subsequently added a feature that allows them to move any holder’s tokens to another wallet (or the “burn” address, meaning they could destroy the tokens — which Sun alleges they threatened to do to him)

Snorri

@SnorriSturluson@social.tchncs.de · 45 minutes ago

@molly0xfff ok, i.e. everything a crypto contract or coin shouldn't do, the whole idea of crypto was that nobody should be able to do that 😜 - The question really is, are people that stupid?

Molly White

@molly0xfff@hachyderm.io · 56 minutes ago

It’s a little rich that Sun is alleging that World Liberty is engaged in fraud, manipulating markets, and potentially violating securities laws after himself only just escaping those very allegations after investing more than $200 million into the president’s family’s crypto projects.

But he also has something of a point: after World Liberty Financial promised they were a solution to “debanking” and that “no one’s ever going to tell you that your account is shut down”, they proceeded to do exactly that to Sun.

#crypto #cryptocurrency #USpol #USpolitics #CitationNeededNewsletter

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On the one hand, it’s a little rich that Sun is alleging that World Liberty is engaged in fraud, manipulating markets, and potentially violating securities laws after himself only just escaping those very allegations after investing more than $200 million into the president’s family’s crypto projects. And Sun’s lawsuit is selective about which agreements he finds to be binding — while much of the lawsuit is based on promises made in various contracts and marketing materials outlining platform governance and token issuance, Sun also readily admits that he read the claim that WLFI tokens were not investments as mere “disclaimers to avoid application of federal law governing the offering of securities” and that “everybody who purchased the tokens in exchange for real-world dollars knew all along [that] the tokens were expected to become tradable”.

But he does have something of a point: World Liberty claimed it was building a decentralized finance platform after the Trump family claimed that they had experienced politically-motivated debanking. The project’s CEO once claimed that on World Liberty, “no one’s ever going to tell you that your account is shut down”, then did exactly that to Sun. The freeze also left Sun unable to transfer, trade, vote with, or stake his tokens, and in November 2025, World Liberty again changed the smart contract to add a capability to seize or destroy any holder’s tokens at will.

Molly White

@molly0xfff@hachyderm.io · 55 minutes ago

Sun is also attempting a delicate balancing act: accusing the Trump family’s World Liberty Financial of fraud while simultaneously maintaining he is still an “ardent” supporter of Trump and his family. His strategy is to pin the whole thing on WLF co-founder Chase Herro.

#crypto #cryptocurrency #USpol #USpolitics #CitationNeededNewsletter

Sun walks a narrow tightrope in his lawsuit, criticizing a Trump family-run cryptocurrency project while simultaneously claiming that he “has long been (and remains) an ardent supporter of President Trump and the Trump family”. He attempts this by aggressively targeting World Liberty co-founder Chase Herro instead, reaching all the way back to alleged drug busts when he was a teenager. Sun portrays Herro as a career grifter whose background is in hawking get-rich-quick schemes. He suggests that Herro owes hundreds of thousands in unpaid taxes and accuses him of making contradictory claims about his primary residency — alternately claiming Puerto Rico or Florida — to dodge both tax liabilities and legal proceedings. He even claims that Herro once boasted about visiting Jeffrey Epstein’s island. And he notes Herro’s participation in a crypto project called Dough Finance shortly before joining World Liberty, and points to speculative tweets suggesting the $2 million hack that ended the project [W3IGG] could have in fact been an insider rug pull.

It’s not immediately clear how Herro’s arrest at 18 for selling drugs or his alleged Epstein connectionb relate to Sun’s contract dispute with World Liberty. Instead, it appears Sun is hoping to remain in the Trumps’ good graces by offering to publicly accept Herro as a scapegoat for whatever wrongdoing may have occurred. — Sun walks a narrow tightrope in his lawsuit, criticizing a Trump family-run cryptocurrency project while simultaneously claiming that he “has long been (and remains) an ardent supporter of President Trump and the Trump family”. He attempts this by aggressively targeting World Liberty co-founder Chase Herro instead, reaching all the way back to alleged drug busts when he was a teenager. Sun portrays Herro as a career grifter whose background is in hawking get-rich-quick schemes. He suggests that Herro owes hundreds of thousands in unpaid taxes and accuses him of making contradictory claims about his primary residency — alternately claiming Puerto Rico or Florida — to dodge both tax liabilities and legal proceedings. He even claims that Herro once boasted about visiting Jeffrey Epstein’s island. And he notes Herro’s participation in a crypto project called Dough Finance shortly before joining World Liberty, and points to speculative tweets suggesting the $2 million hack that ended the project [W3IGG] could have in fact been an insider rug pull. It’s not immediately clear how Herro’s arrest at 18 for selling drugs or his alleged Epstein connectionb relate to Sun’s contract dispute with World Liberty. Instead, it appears Sun is hoping to remain in the Trumps’ good graces by offering to publicly accept Herro as a scapegoat for whatever wrongdoing may have occurred.

Cybarbie

@nf3xn@mastodon.social · 44 minutes ago

@molly0xfff Those pesky Boyars!!!

Molly White

@molly0xfff@hachyderm.io · 54 minutes ago

In World Liberty’s defamation suit against Sun, they claim that their ability to freeze his tokens was well known to him, and that claiming they installed a secret “backdoor” is defamatory. They also object to him describing WLF’s governance as a sham, and accusing them of treating the crypto community as “a personal ATM”.

#crypto #cryptocurrency #USpol #USpolitics #CitationNeededNewsletter

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World Liberty v. Sun
World Liberty made good on their threat to “see you in court pal” with a defamation lawsuit filed in a Florida state court on May 4.3 The case focuses on Sun’s tweets in which he accused World Liberty of embedding a secret “backdoor blacklisting function” to “freeze investor funds without disclosure or due process” and treat “the crypto community as a personal ATM”. Sun also claimed World Liberty’s community governance votes were mere “theater” with “predetermined” outcomes, and that the project’s governance framework had been “hollowed out from the inside”.

World Liberty’s complaint is considerably shorter and narrower than Sun's sprawling lawsuit, focusing entirely on defamation rather than the broader contractual and fraud claims Sun raises. But what the complaint lacks in breadth, it attempts to make up for in outrage, repeatedly emphasizing that the cryptocurrency industry is “built on trust” and that Sun’s “false statements strike at the core of World Liberty's reputation”.c — World Liberty v. Sun World Liberty made good on their threat to “see you in court pal” with a defamation lawsuit filed in a Florida state court on May 4.3 The case focuses on Sun’s tweets in which he accused World Liberty of embedding a secret “backdoor blacklisting function” to “freeze investor funds without disclosure or due process” and treat “the crypto community as a personal ATM”. Sun also claimed World Liberty’s community governance votes were mere “theater” with “predetermined” outcomes, and that the project’s governance framework had been “hollowed out from the inside”. World Liberty’s complaint is considerably shorter and narrower than Sun's sprawling lawsuit, focusing entirely on defamation rather than the broader contractual and fraud claims Sun raises. But what the complaint lacks in breadth, it attempts to make up for in outrage, repeatedly emphasizing that the cryptocurrency industry is “built on trust” and that Sun’s “false statements strike at the core of World Liberty's reputation”.c

World Liberty’s argument is that the so-called secret backdoor wasn’t a secret at all. The complaint insists the freeze authority “was clearly and repeatedly disclosed to Sun” in his agreement with the company, the Token Unlock Agreement (which Sun says were additional terms imposed on holders who wished to unlock their tokens only after he had purchased his tokens), the publicly available terms of sale, and in the smart contracts themselves. Sun does somewhat undermine his own framing in his lawsuit, where he admits “the upgrade is technically visible on the public blockchain”. This admission may prove awkward for his defense, as it’s hard to characterize as “secret” something he acknowledges was visible to anyone who looked, although Sun also suggests the blacklisting function was implemented in July 2025 — after he had already acquired his tokens.

That said, World Liberty’s position essentially boils down to “we disclosed that we kept all the centralized powers we said we were building a defi platform to escape, so calling those powers ‘secret’ is defamatory.” — World Liberty’s argument is that the so-called secret backdoor wasn’t a secret at all. The complaint insists the freeze authority “was clearly and repeatedly disclosed to Sun” in his agreement with the company, the Token Unlock Agreement (which Sun says were additional terms imposed on holders who wished to unlock their tokens only after he had purchased his tokens), the publicly available terms of sale, and in the smart contracts themselves. Sun does somewhat undermine his own framing in his lawsuit, where he admits “the upgrade is technically visible on the public blockchain”. This admission may prove awkward for his defense, as it’s hard to characterize as “secret” something he acknowledges was visible to anyone who looked, although Sun also suggests the blacklisting function was implemented in July 2025 — after he had already acquired his tokens. That said, World Liberty’s position essentially boils down to “we disclosed that we kept all the centralized powers we said we were building a defi platform to escape, so calling those powers ‘secret’ is defamatory.”

~9 more replies

Molly White

@molly0xfff@hachyderm.io · 53 minutes ago

In short: the two sides are suing one another despite likely knowing the true nature of the deal they agreed to. Sun admits the tokens he bought are unregistered securities, World Liberty admits they’re not decentralized and Sun shouldn’t have taken their claims to be seriously.

#crypto #cryptocurrency #USpol #USpolitics #CitationNeededNewsletter

The lawsuits reflect a common crypto pattern: two experienced cryptocurrency entities, both with less than stellar reputations for trustworthiness, entered a deal, both likely aware of its true nature. Sun admitted the tokens he purchased were effectively unregistered securities with “boilerplate” disclaimers that everyone knew were false. World Liberty built in centralized controls to a supposedly decentralized project after completing its initial token sale, claiming Sun as an experienced crypto figure “knows that it is common for a cryptocurrency company to have the ability and right to freeze accounts” — as though he shouldn’t have taken seriously their claims of decentralization and promises not to freeze accounts. Each side bet they could profit despite the contradictions, and now they’re locked in a legal battle claiming the other violated principles neither of them actually believed in.

Molly White

@molly0xfff@hachyderm.io · 52 minutes ago

Senior GOP officials reportedly phoned up Commerce Secretary Howard Lutnick to get him to pressure a pro-crypto super PAC funded by the company he “divested” from to nix a planned ad spend in favor of Texas Senate candidate Ken Paxton.

#crypto #cryptocurrency #USpol #USpolitics #CitationNeededNewsletter

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In elections and political influence
In an April [noted] post, I outlined how the Fellowship PAC, a new pro-cryptocurrency, pro-MAGA super PAC, is primarily funded by Cantor Fitzgerald — the firm previously run by Howard Lutnick before he “divested” by transferring it to his sons when he was appointed Commerce Secretary.

Link to other Citation Needed article: Commerce Secretary Howard Lutnick’s old firm pumps $10 million into super PAC led by Tether executive — In elections and political influence In an April [noted] post, I outlined how the Fellowship PAC, a new pro-cryptocurrency, pro-MAGA super PAC, is primarily funded by Cantor Fitzgerald — the firm previously run by Howard Lutnick before he “divested” by transferring it to his sons when he was appointed Commerce Secretary. Link to other Citation Needed article: Commerce Secretary Howard Lutnick’s old firm pumps $10 million into super PAC led by Tether executive

The PAC filed an FEC report announcing planned independent expenditures of $1.75 million to support Republican Senate candidate Ken Paxton in his contentious Texas primary runoff against incumbent John Cornyn.7 Trump has conspicuously declined to endorse either candidate. According to Axios, senior Republican officials called Lutnick to pressure him to cancel the expenditures, which they viewed as a potentially disastrous move.8 “Backing the guy who came in second place [in the GOP state primary] and risk[ing] handing Democrats the Senate is pure political malpractice”, said an NRSC spokesperson about the planned ad spend. While Axios noted that “it was unclear to people familiar with the matter if Lutnick followed up on those phone calls,” the Fellowship PAC later amended the report with the Paxton line item missing and a note that they had “remove[d] an ad with no anticipated air date”.9

Transferring the mega-firm to his 29- and 27-year-old sons was already a highly dubious divestiture. But if GOP officials believe pressuring Lutnick is a worthwhile strategy to influence a super PAC primarily funded by the firm he now supposedly has nothing to do with — and if that strategy apparently works — it’s further evidence that Lutnick has not properly eliminated this massive conflict of interest. — The PAC filed an FEC report announcing planned independent expenditures of $1.75 million to support Republican Senate candidate Ken Paxton in his contentious Texas primary runoff against incumbent John Cornyn.7 Trump has conspicuously declined to endorse either candidate. According to Axios, senior Republican officials called Lutnick to pressure him to cancel the expenditures, which they viewed as a potentially disastrous move.8 “Backing the guy who came in second place [in the GOP state primary] and risk[ing] handing Democrats the Senate is pure political malpractice”, said an NRSC spokesperson about the planned ad spend. While Axios noted that “it was unclear to people familiar with the matter if Lutnick followed up on those phone calls,” the Fellowship PAC later amended the report with the Paxton line item missing and a note that they had “remove[d] an ad with no anticipated air date”.9 Transferring the mega-firm to his 29- and 27-year-old sons was already a highly dubious divestiture. But if GOP officials believe pressuring Lutnick is a worthwhile strategy to influence a super PAC primarily funded by the firm he now supposedly has nothing to do with — and if that strategy apparently works — it’s further evidence that Lutnick has not properly eliminated this massive conflict of interest.

Molly White

@molly0xfff@hachyderm.io · 52 minutes ago

The crypto industry is ramping up polling to try to (once again) convince legislators who are up for re-election that they need to support the industry’s legislative agenda in order to win over voters. But two massively different poll results illustrate the dubiousness of these polls.

#crypto #cryptocurrency #USpol #USpolitics #CitationNeededNewsletter

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Crypto polls
A survey commissioned by the CoinDesk crypto publication has indicated that 73% of the US voters they polled (evenly split among Republican– and Democratic– identified respondents) disapprove of senior government officials having personal business with the crypto industry, including 59% of Republican respondents. However, most were not aware of Trump’s crypto ties: 55% self-reported that they were not very or not at all aware of Trump’s involvement with the sector, and only 17% were aware that he and his sons co-founded World Liberty Financial.1 — Crypto polls A survey commissioned by the CoinDesk crypto publication has indicated that 73% of the US voters they polled (evenly split among Republican– and Democratic– identified respondents) disapprove of senior government officials having personal business with the crypto industry, including 59% of Republican respondents. However, most were not aware of Trump’s crypto ties: 55% self-reported that they were not very or not at all aware of Trump’s involvement with the sector, and only 17% were aware that he and his sons co-founded World Liberty Financial.1

The cryptocurrency industry is ramping up their own polling in hopes of (once again) convincing candidates that they need to support the industry’s legislative agenda in order to win over voters. HarrisX, a frequent pro-crypto pollster, has just published a new poll stating without any evidence that “crypto voters represent a sizable and influential bloc”. It appears designed to lobby Congressmembers to vote for the Clarity Act, with a section at the end advertising that “A senator who votes to pass the CLARITY Act enjoys a +20 net electoral upside” and that “For the broader electorate, supporting CLARITY is a clear net-positive credential.” The poll also claims that 52% of respondents said that a candidate’s position on cryptocurrency regulation is extremely or somewhat important to their voting decisions.10

But this poll doesn’t align with CoinDesk’s, which I should also note is a pro-crypto publication whose new editorial board endorsed Trump in 2024 [I68]. In a very similar question, 24% of respondents identified crypto as important to them in the 2026 elections — less than half of HarrisX’s findings. Only 1% identified it as the single most important issue to them when presented alongside issues like cost of living, the economy, Social Security and Medicare, immigration, or healthcare. HarrisX did not immediately respond to my request for poll data or questions about their methodology or who commissioned the poll.

Molly White

@molly0xfff@hachyderm.io · 50 minutes ago

The DOJ and CFTC are going after a US soldier who allegedly used his access to confidential military information to profit more than $400,000 on Polymarket bets. They are not going after Polymarket, which is supposed to prohibit US bettors, and whose advisory board includes Donald Trump Jr.

“The whole world, unfortunately, has become somewhat of a casino,” said former casino tycoon and current President Trump.

“I don’t like it,” said the man whose own social media platform has announced plans to launch a crypto-based prediction market feature.

#crypto #cryptocurrency #USpol #USpolitics #CitationNeededNewsletter

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In prediction markets
The Justice Department has brought charges11 and the CFTC has filed a lawsuit12 against a US soldier who placed bets on Venezuela-related Polymarket contracts while helping plan the operation to capture Venezuelan President Nicolás Maduro. The soldier, Gannon Ken Van Dyke, allegedly made nearly $410,000 on the bets, then transferred the funds to a brokerage account and made a few clumsy attempts to erase his tracks. Van Dyke has pleaded not guilty.

Notably absent is any action against Polymarket. The New York-based platform agreed to stop serving US customers in a 2022 CFTC settlement, but its easily bypassed geofencing continues to allow widespread American access. Federal agencies have previously prosecuted firms for such inadequate controls, but appear unconcerned with Polymarket — where President Trump’s son, Donald Trump Jr., is an investor and advisory board member. — In prediction markets The Justice Department has brought charges11 and the CFTC has filed a lawsuit12 against a US soldier who placed bets on Venezuela-related Polymarket contracts while helping plan the operation to capture Venezuelan President Nicolás Maduro. The soldier, Gannon Ken Van Dyke, allegedly made nearly $410,000 on the bets, then transferred the funds to a brokerage account and made a few clumsy attempts to erase his tracks. Van Dyke has pleaded not guilty. Notably absent is any action against Polymarket. The New York-based platform agreed to stop serving US customers in a 2022 CFTC settlement, but its easily bypassed geofencing continues to allow widespread American access. Federal agencies have previously prosecuted firms for such inadequate controls, but appear unconcerned with Polymarket — where President Trump’s son, Donald Trump Jr., is an investor and advisory board member.

“The whole world, unfortunately, has become somewhat of a casino,” said former casino tycoon and current President Trump. “And you look at what’s going on all over the world in Europe and every place, they’re doing these betting things,” he said, referring to a continent where at least ten countries have broadly banned prediction markets as unlicensed gambling websites even as the federal regulator he appointed embraces them and sues states that try to apply oversight via their existing gambling laws. “I don’t like it, conceptually, but it is what it is. No, I think that I’m not happy with any of this,” said the man whose own social media platform has announced plans to launch a crypto-based prediction market feature and whose son is an adviser and investor in Polymarket and a paid adviser to Kalshi.

Trump later backpedaled on his comments, arguing that the US risks being left behind by other countries that permit such platforms. “I know people that are in the prediction market business, and they’re pretty happy with it,” he added.13 — “The whole world, unfortunately, has become somewhat of a casino,” said former casino tycoon and current President Trump. “And you look at what’s going on all over the world in Europe and every place, they’re doing these betting things,” he said, referring to a continent where at least ten countries have broadly banned prediction markets as unlicensed gambling websites even as the federal regulator he appointed embraces them and sues states that try to apply oversight via their existing gambling laws. “I don’t like it, conceptually, but it is what it is. No, I think that I’m not happy with any of this,” said the man whose own social media platform has announced plans to launch a crypto-based prediction market feature and whose son is an adviser and investor in Polymarket and a paid adviser to Kalshi. Trump later backpedaled on his comments, arguing that the US risks being left behind by other countries that permit such platforms. “I know people that are in the prediction market business, and they’re pretty happy with it,” he added.13

SomeVeganCheeseIsOk

@SomeVeganCheeseIsOk@mastodon.social · 59 minutes ago

@molly0xfff 😂🤣 omg too funny. Like crabs in a bucket.

Also - I love your work beyond reason. You are spectacular.