Justin Sun keeps $45M World Liberty lawsuit in open court

A California federal judge rejected World Liberty Financial's bid to push Justin Sun's $45 million lawsuit into private arbitration, keeping the dispute in open court.

A California federal judge rejected World Liberty Financial's bid to move Justin Sun's $45 million lawsuit into private arbitration, keeping the dispute in open court and exposing the project's token controls to public scrutiny.

"The judge ruled that all of my individual claims will remain in the public courtroom," Sun said in a post on X after the hearing.

The case, Sun et al v. World Liberty Financial LLC, was filed in April in the US District Court for the Northern District of California and is assigned to Judge James Donato. Sun invested $45 million in WLFI tokens during the project's early sale, which he says helped push total proceeds past $550 million. The judge ordered both sides to determine which claims tied to Sun-controlled companies stay in court and which move to arbitration.

The ruling does not decide whether World Liberty acted illegally, and the company still can seek dismissal. But it keeps Sun's personal claims visible, a procedural outcome that matters for a dispute seeking hundreds of millions of dollars in damages and touching the $4 billion market cap of World Liberty's USD1 stablecoin.

Sun Alleges Hidden Controls in WLFI and USD1

Sun's complaint alleges World Liberty embedded functions in the WLFI smart contract allowing it to freeze, restrict, or burn any holder's tokens without notice, and that the team used those controls against his own holdings. He says the same mechanisms exist inside USD1, World Liberty's dollar-pegged stablecoin, and has urged USD1 holders to understand their funds could be frozen or destroyed under similar conditions.

World Liberty's risk disclosures state it can block or freeze wallet addresses and associated tokens when it determines they are linked to illegal activity or violations of its terms. The company has said Sun agreed to its freezing authority under an agreement governing his tokens. Sun previously obtained a court order preventing World Liberty from permanently burning, reallocating, or otherwise disposing of the tokens involved in the dispute.

Financial Questions and FTX Comparisons

Sun has also questioned whether World Liberty has the capital to satisfy a judgment, noting USD1's reported $4 billion market cap reflects user collateral rather than company funds. Public reporting cited in the dispute states World Liberty posted roughly five billion WLFI tokens as collateral on Dolomite, a lending platform co-founded by the company's own chief technology officer.

Analysts following the arrangement have compared the circular borrowing structure to leverage patterns seen before the collapse of FTX, where assets moved between closely linked entities in ways that later proved difficult to unwind. Sun has also pointed to the background of World Liberty co-founder Chase Herro, who previously led Dough Finance, a project an investor lawsuit alleged Herro personally moved funds from after it claimed a hack.

World Liberty has denied wrongdoing and separately sued Sun in Florida for defamation, accusing him of conducting a campaign to damage the company's reputation and WLFI token. Sun has denied those allegations. WLFI has lost nearly 80 percent of its value since launch, CoinGecko data shows, as the legal battle has intensified.

This article is for informational purposes only and does not constitute investment advice.