World Liberty Financial's Circular Finance Masterclass: Borrow $75M From Your Advisor's Protocol, Leave Regular Folk Stuck in the Elevator

World Liberty Financial, the Trump family-backed crypto venture, pledged 5 billion WLFI tokens on the Dolomite lending platform to borrow $75 million in stablecoins, draining the protocol's USD1 pool and sending more than $40 million to Coinbase Prime.

The WLFI token dropped nearly 10 percent to a record low as the oversized collateral position, nominally valued at about $440 million, left Dolomite exposed to potential bad debt because any forced liquidation would likely crash the thinly traded token's price.

The maneuver, involving WLFI using its own governance token to borrow its own USD1 stablecoin from a protocol advised by a World Liberty Financial insider, has sparked concerns about circular economics and the use of user-funded pools to finance a single insider borrower.

Onchain records show the sequence began on Feb. 8, when WLFI's treasury deposited 14 million USD1 into Dolomite as collateral and borrowed 11.4 million USDC against it. Minutes later, 11.45 million USDC moved to a Coinbase Prime deposit address.

Two days later, 12.5 million USD1 was sent from the treasury to a separate Coinbase Prime deposit address. That 12.5 million USD1 was not borrowed from Dolomite—it moved directly from WLFI's treasury wallet to the exchange.

The WLFI token entered the picture twelve days later. On Feb. 20, the treasury deposited 890 million WLFI into Dolomite and borrowed 20 million USD1 against it. On March 24, another 1.1 billion WLFI followed.

In total, 1.99 billion WLFI tokens now sit as collateral inside Dolomite, and the treasury has received roughly 31.4 million in stablecoins from the protocol.

The choice of protocol is not incidental. Dolomite co-founder Corey Caplan is an advisor to World Liberty Financial.

WLFI now sits at the top of Dolomite's supplied-assets list with $458.9 million in supply liquidity, roughly 55% of the protocol's entire $835.7 million total.

The structural concern sits in Dolomite's USD1 pool. USD1 ranks second on the protocol with $180 million supplied against $167.5 million borrowed, a utilization ratio of about 93%.

The USD1 supply rate sits at 16.24% and the borrow rate at 9.18%, figures that reflect concentrated borrowing activity rather than broad organic demand.

At that utilization, ordinary depositors who lent USD1 to the pool expecting to withdraw at will cannot all do so at once. Their funds are effectively locked until the large borrower repays.

The collateral backing the WLFI-denominated borrow presents a separate problem. WLFI trades with limited market depth relative to the size of the position. If the token moves sharply lower and Dolomite's liquidation mechanism triggers, the forced sale would crash the price before the collateral could be unwound,