World Liberty Financial (WLFI) borrowed $75 million in stablecoins from a lending protocol its own advisor co-founded, pushing the pool’s utilization to 100 percent and trapping depositor funds. The transaction occurred on April 9, 2026, according to on-chain data.
Data from blockchain explorers shows that a wallet linked to WLFI deposited 5 billion of its own WLFI tokens as collateral on the Dolomite protocol. The entity then proceeded to borrow the entirety of the available stablecoins, which were subsequently moved to a deposit address at Coinbase Prime.
The move created a liquidity crisis within the affected Dolomite lending pool. By borrowing 100 percent of the available assets, WLFI left no liquidity for other depositors to withdraw their funds, effectively freezing their assets on the platform. This type of event, where a single entity uses its own token to borrow heavily from a related party, is often viewed as a significant red flag in the DeFi space.
The event highlights a major conflict of interest and risk management failure, as an advisor to WLFI is also a co-founder of the Dolomite protocol. This relationship could attract significant regulatory scrutiny, particularly as depositor funds remain frozen. The incident is likely to trigger a collapse in the WLFI token price and could lead to a bank run on the Dolomite protocol as users question the platform's risk parameters and exposure.
This article is for informational purposes only and does not constitute investment advice.
