WLFI Eagle: A Feast of the Fusion of Political Capital and Encryption Financial Engineering

Author: danny X, @agintender

WLFI is a project that combines political branding with decentralized finance, led by the Trump family, with a highly centralized structure. It rapidly amplifies its valuation through a capital circulation design with ALT5 and adopts a low circulation + high FDV token model. Although it has attracted participation from institutions and crypto capital, it also comes with technical security, governance centralization, and potential regulatory risks.

1. Project Origin: The TRUMP FAMILY’s Journey to Crown in DeFi

Since its inception, World Liberty Financial has deeply intertwined its core values with Trump’s political brand, demonstrating that its strategic intent is not technological innovation, but rather leveraging a strong brand identity for market penetration and capital raising.

1.1. Vision and Mission: “Financial Democratization” and Political Narrative

World Liberty Financial officially debuted to the public in September 2024, with its official positioning clearly stating that the project is “inspired by the vision of President Donald Trump.” This brand positioning is not coincidental, but rather constitutes the project’s most core unique selling point. Its publicly stated mission is to “democratize DeFi” by creating user-friendly tools, aiming to attract mainstream Web2 users, and has adopted the slogan “Make Cryptocurrency and America Great Again.” This politically charged promotion shapes WLFI as a “counter-establishment” movement against the “manipulated” traditional financial system.

1.2. Core Leadership and Operations Team

The involvement of the Trump family is direct and official. According to the project documents, Donald Trump himself serves as the “Chief Cryptocurrency Advocate,” while his sons Donald Trump Jr. and Eric Trump serve as “Web3 Ambassadors,” and even his 18-year-old son Barron Trump has been given the title of “Chief DeFi Visionary.” This might be what is known as a father-son team in action?!

The daily operations of the project are managed by a core team of three people: COO Zachary Folkman, Data and Strategy Chase Herro, and CEO Zach Witkoff. It is worth noting that Witkoff is the son of Steve Witkoff, who is an advisor to Trump on Middle East issues, and whether there is any political connection is subjective.

1.3. Initial Strategy: Building a User-Friendly DeFi Lending Portal through Aave

The initial technical blueprint presented to the outside world was relatively simple. The first and only important technical proposal put forward by WLFI is to launch an instance of the Aave v3 protocol. Aave is one of the most mature and battle-tested lending protocols in the DeFi space.

The core of this strategy is not to independently develop new DeFi technologies, but to leverage the existing robust infrastructure and liquidity pools of Aave to build a simplified, user-friendly interface for newcomers. The aim is to lower the barriers for users to enter DeFi, thereby significantly increasing user acquisition. This strategy indicates that the initial focus of the project is to quickly gain users by leveraging brand influence, rather than innovating underlying technologies.

This initially set, relatively conservative goal provides an important reference point for us to understand the project’s later massive strategic transformation. The original lending narrative was simple and easy to understand, helping the project attract public attention and the first batch of funding in its early stages. However, this simple concept was soon replaced by a far grander and more complex plan, which is to build a financial empire centered around stablecoins and publicly listed companies.

This transformation suggests that the initial Aave plan may have merely been a “narrative foothold”—a story that is easily accepted for entering the market, while the truly complex and lucrative financial machine is being built behind the scenes. This is not a simple business evolution, but a fundamental change in the core business model of the project—from a software service provider to a full-fledged financial institution.

2. Investor Constellations: A Mixture of Institutions, Insiders, and Controversial Figures

The investor composition of World Liberty Financial is extremely complex, presenting a capital network formed by traditional financial institutions, insiders of the project, and controversial figures in the crypto world. This diversified capital structure provides funding for the project while also bringing significant reputational risks.

2.1. The Trump family’s control and financial arrangements

The Trump family holds absolute dominance in World Liberty Financial. A Trump business entity named DT Marks DEFI LLC owns 60% of the company’s equity. More critically, this entity is entitled to receive up to 75% of the revenue from all WLFI token sales. This profit distribution model is extremely rare in startups, far exceeding the typical founder equity incentive, ensuring that the vast majority of the financing proceeds will directly flow into the Trump family’s pockets.

According to public documents and market data estimates, the paper value of the WLFI tokens held by the Trump family has exceeded $6 billion, with Donald Trump reportedly controlling about two-thirds of the share. This figure makes the cryptocurrency business surpass real estate in one fell swoop, becoming the Trump family’s primary business interest.

2.2. Institutional Endorsement: The Cloak of Legitimacy

In order to shape its legitimacy image in the mainstream financial market, WLFI successfully attracted participation from several well-known institutional investors. These include Point72 Asset Management, led by billionaire Steve Cohen, Hong Kong-based Soul Ventures, and DWF Labs, which invested 25 million USD. The involvement of these institutions has provided this politically charged crypto project with a layer of recognition from the traditional financial market, becoming an important capital for its external promotion and establishment of credibility.

2.3. The Key Role of Justin Sun: Investment, Advisor, and Regulatory Concerns

TRON founder Justin Sun is one of the cornerstone investors of WLFI. He initially invested $30 million in the project, and later increased the total investment to at least $75 million. In return, Justin Sun was officially appointed as the project’s official advisor, and the USD1 stablecoin subsequently launched by WLFI also chose to operate on the TRON network led by him.

One of the most striking aspects of this investment relationship is the subtle timeline of its interactions with U.S. regulators. The SEC had previously filed a fraud lawsuit against Justin Sun and his company. However, shortly after Trump took office, in February 2025, the SEC suddenly dropped the case. Reports indicate that this decision left many officials within the SEC, who were confident in a victory, feeling “surprised.” This series of events—from Justin Sun’s massive investment in the Trump family business to the significant regulatory threats he faced rapidly disappearing after the new government took office in the U.S.—has sparked widespread speculation about whether there was any exchange of favors.

This makes WLFI not just a commercial project, but potentially a tool for exerting political influence. For investors, this means that the success or failure of the project may no longer depend on market performance or technical strength, but is closely linked to the political direction and regulatory decisions of the U.S. government, introducing an unprecedented and unquantifiable special risk.

2.4. Aqua 1 / Web3Port Controversy: Clouds of Suspicious Capital

Another controversial massive investment comes from a UAE-based foundation, Aqua 1 Foundation, which invested $100 million in WLFI. However, an independent investigative report pointed out that Aqua 1 is associated with a Hong Kong market maker named Web3Port, which has been banned by multiple exchanges for alleged market manipulation.

There are news reports claiming that Aqua 1’s co-founder “Dave Lee” is actually the same person as David Jia Hua Li from Web3Port, and that the websites of both companies share the same server infrastructure. In response to these allegations, Aqua 1 and Dave Lee publicly denied any operational connections, stating that the reports “do not align with the facts,” but did not specify which information is incorrect, citing that it involves “ongoing regulatory and compliance processes.”

This strategic division based on the background of investors reveals the complex fundraising strategies of the project parties. On one hand, the project utilizes “clean” institutional capital from firms like Point72 to showcase its legitimacy and credibility to the public and traditional markets. On the other hand, it raises substantial funds from controversial figures like Justin Sun and through channels rumored to be associated with tainted entities such as Web3Port.

3. Strategic Evolution: Transitioning to an Ecosystem Centered Around the Stablecoin USD1

The World Liberty Financial project has undergone a crucial strategic transformation, evolving from a simple application layer project into a grand ecosystem dedicated to building underlying financial infrastructure, with the core being the USD1 stablecoin.

3.1. From Lending Frontend to Financial Infrastructure

The initial narrative of the project was to provide users with “access to third-party DeFi applications,” making it appear as a portal or aggregator in the DeFi world. However, this narrative underwent a fundamental shift in March 2025, when the project team officially announced the launch of its native stablecoin USD1 and committed to building a “next-generation financial platform.”

This transformation marks a qualitative leap in the project’s ambition, scope, and risk status.

3.2. In-depth Analysis of USD1 Stablecoin: Mechanism, Custody, and Growth Drivers

• Mechanism: USD1 is a fiat-collateralized stablecoin pegged 1:1 to the US dollar. Its reserve assets consist of short-term US Treasury bills, US dollar cash deposits, and other cash equivalents. This is a conservatively recognized and mature stablecoin model in the industry, similar to leaders like USDC and USDT.
• Custody: To enhance its credibility, the reserve assets of USD1 are held by the well-known digital asset custody provider BitGo. BitGo enjoys a good reputation among institutional clients, and its involvement provides an important layer of security for the assets of USD1.
• Growth: USD1 achieved remarkable growth after its launch. Since going live in March 2025, it took just over a month for its market value to exceed $2.1 billion, being touted as “the fastest growing stablecoin in history.”
• Key Growth Driver: However, this explosive growth did not stem from widespread organic adoption in the market. The vast majority of its market value comes from a single, massive transaction: a $2 billion investment agreement between Abu Dhabi’s investment company MGX and Binance, which specified the use of USD1 as the sole trading medium. Secondly, the activity of USD1 on the BNB CHAIN.
• Lack of Transparency: Although the project team promised to conduct regular third-party audits, as of May 2025, there has been no public or detailed audit report or asset proof explaining the composition of the USD1 reserves in the market. For stablecoins, reserve transparency is the lifeline for maintaining user confidence. Later, in June 2025, a co-founder stated that the audit report had been received and would be published soon, but this still reflects the project’s lag in disclosing key information.

This strategic transformation reveals the true economic position of stablecoins within the WLFI ecosystem. The WLFI token itself is clearly defined as a pure governance token, without any economic rights attached. So, what is the engine that creates value for the business entity controlled 60% by the Trump family? The answer is the USD1 stablecoin.

Like the business models of Tether and Circle, the issuers of fiat-collateralized stablecoins can generate massive revenue by investing reserve assets in interest-bearing financial instruments like U.S. Treasury bonds. Therefore, stablecoins are not only a product of WLFI but also the core engine on which the entire enterprise relies for survival and cash flow generation. Shifting from a lending narrative to stablecoins is an inevitable choice for building a sustainable business model for the project.

However, this growth model also brings significant risks. The so-called “fastest-growing” narrative is a product of financial engineering, rather than a result of natural market selection. Its market value is highly dependent on a single transaction with MGX/Binance, which means that the liquidity and stability of USD1 are deeply tied to a very small number of institutional counterparties, creating severe systemic risks. Unlike USDC or USDT, which are integrated into thousands of protocols and widely used by millions of users, the foundation of USD1 is both narrow and fragile. Any fluctuations in its relationship with MGX or Binance could trigger a catastrophic collapse of its perceived value and utility.

3.3. Ecosystem Partners and Integration

In order to build its DeFi ecosystem, WLFI actively establishes partnerships with other leading blockchain protocols, including Ondo Finance, Ethena, Chainlink, Sui, and Aave. In addition, the project has established a diversified digital asset reserve through its “macro strategy,” holding a variety of mainstream cryptocurrencies such as BTC, ETH, TRX, LINK, SUI, and ONDO.

4. ALT5 Sigma Mechanism: Building a Siphoning Tool for the Public Market

The transaction between World Liberty Financial and Nasdaq-listed company ALT5 Sigma is the core of the financial engineering of this project, and its complexity and non-traditional design are extremely rare in both the cryptocurrency and traditional financial markets. This mechanism aims to create a tradable public market proxy for the illiquid WLFI tokens and establish its market valuation through a sophisticated capital closed loop.

4.1. Analysis of the $1.5 Billion “Cryptocurrency Vault” Transaction

In August 2025, WLFI effectively completed a control acquisition of ALT5 Sigma (ALTS). ALT5 Sigma was originally engaged in pain treatment business and later transformed into a payment technology publicly traded company. The core of the transaction is that ALT5 announced it would raise $1.5 billion through a targeted issuance and a concurrent private placement to implement a “WLFI Treasury Strategy.”

As part of the transaction, the core executive team of WLFI has fully joined the leadership of ALT5: WLFI’s CEO Zach Witkoff serves as the chairman of the board of ALT5, while Eric Trump has become a board member.

4.2. The Circulation of Capital: How WLFI Funds Its Treasury

The cleverness of this transaction lies in its designed capital circulation mechanism, the specific steps are as follows:

Step 1: WLFI exchanges tokens for equity. World Liberty Financial participated as the lead investor in ALT5’s private placement. However, the consideration it paid was not cash, but WLFI tokens issued by itself, worth $750 million. Through this non-cash transaction, WLFI received shares and warrants of ALT5.

Step 2: ALT5 raises cash from external investors. At the same time, ALT5 raised another $750 million in cash from other external institutional investors through a targeted private placement.

Step 3: ALT5 uses the raised cash to repurchase WLFI tokens. Finally, ALT5 will use the $750 million cash raised from external investors to directly purchase more WLFI tokens from World Liberty Financial to enrich its so-called “company treasury.”

This process creates a perfect capital closed loop: WLFI uses tokens generated at zero cost to gain control of a publicly listed company; then, this listed company uses real capital raised from the public market to buy back WLFI’s tokens. This operation not only creates real demand for WLFI tokens but also gives them a market price through the trading activities of the listed company.

4.3. Strategic Objective: Create Valuation and Liquidity for Illiquid Assets

Before trading with ALT5, the WLFI token was set as non-transferable, so there was no market price. The trading with ALT5 is the first time an official valuation has been assigned to the WLFI token — at $0.20 each. This price was set by both parties (which are actually the same controlling party), but because it took place within the trading framework of a listed company, it created substantial paper wealth for insiders holding billions of tokens.

This structure mimics MicroStrategy’s strategy to transform the company into a Bitcoin proxy stock. It effectively turns ALTS shares into a public market trading proxy for the WLFI token. Investors can indirectly gain exposure to WLFI by purchasing ALTS shares, thus addressing the early liquidity issues of the WLFI token.

This mechanism is a perfect combination of regulatory arbitrage and financial alchemy. Its core lies in utilizing regulated public markets to endorse and price an unregulated crypto asset. By orchestrating a transaction where a Nasdaq-listed company acquires WLFI tokens at a specific price, the project team has created a verifiable valuation that even needs to be reported to the SEC.** This is nothing short of financial alchemy: transforming a self-issued, illiquid digital token into an asset with verifiable paper value,** which can then be used for collateral, included on balance sheets, or serve as a basis for further financing.

Former SEC officials have issued serious warnings about the transaction, pointing out that its inherent conflicts of interest “bring the worst practices in the crypto ecosystem into the regulated public market.” However, from the perspective of the project parties, this conflict of interest is not a loophole, but a core feature of the mechanism’s design. Since the same group of people controls both the asset seller (WLF) and the buyer (ALT5), they can fully dominate the transaction terms for their own benefit. This is not a fair trade, but a carefully orchestrated performance whose sole purpose is to achieve specific financial goals for the insiders of WLF (namely, to create valuation and liquidity). This structure poses a huge risk to external investors in ALTS, as their capital is being used to support an asset controlled by a management team with inherent conflicts of interest.

5. WLFI Token Economics: Supply, Distribution, and Utility Analysis

The economic model design of the WLFI token is full of contradictions and opacity, and its supply distribution and release mechanisms seem to be carefully crafted to create maximum market advantages for insiders.

5.1. Total Supply and Contradictory Distribution Model

The total supply and maximum supply of WLFI tokens are both 100 billion. However, there are two completely different and contradictory versions circulating in the market regarding how these tokens are allocated:

According to the public statement by project partner Chase Herro, the token distribution plan is as follows: 63% will be sold to public investors, 17% will be used for user rewards, and 20% will be retained for the project team.

5.2. Token Sale Rounds and Early Investor Distribution

The WLFI project has successfully raised a total of $550 million from over 85,000 KYC-verified participants through multiple rounds of token sales, as of March 2025. However, its early sales process was not smooth sailing. A sales event in October 2024 was chaotic due to a website crash, raising only over $8 million, far below its set target of $300 million.

Early investors acquired tokens at very low prices, including rounds at $0.015 and $0.05 per token. This means that once the tokens are listed for trading, these early investors will hold significant unrealized gains.

5.3. Token Release Plan: Unlocking on September 1 and Future Lock-up

According to the project team’s announcement, the WLFI token is scheduled to start trading on the market on September 1st. This initial unlock is specifically for early investors: 20% of the tokens purchased in the $0.015 and $0.05 rounds will be released and become tradable. It is worth noting that the delivery price of ALTS to WLFI is $0.2.

The number of tokens unlocked this time accounts for about 5% of the total supply of WLFI. This is a key design as it ensures that the circulating supply at the initial listing (i.e., the “floating cap”) is extremely low. At the same time, the tokens allocated to founders, team members, and advisors will remain locked at the time of listing to prevent immediate sell-offs. Additionally, the remaining 80% of tokens in the hands of investors will also continue to be locked, with the specific release schedule to be determined by future community governance votes.

This token release arrangement is carefully designed to create a “low liquidity, high FDV” market dynamic. By unlocking only a tiny portion of the total supply (about 5%), the circulating tokens are artificially kept in a state of scarcity. Meanwhile, the project’s strong brand background and endorsements from institutional investors create significant market hype, thus driving up its price in the futures market and overall FDV. This “low liquidity, high FDV” situation is a classic breeding ground for market manipulation. With just a small amount of buying power, it can trigger a sharp rise in token prices. This price surge is extremely beneficial for insiders, as it can greatly increase the paper value of the large amount of locked tokens they hold, even if these tokens cannot be sold temporarily.

5.4. Utility Analysis: Pure Governance Tokens Without Economic Rights

The official positioning of the WLFI token is very clear: it is a purely governance token. Holders have the right to vote on the future direction of the protocol, but do not enjoy any rights to share in the protocol’s revenue, dividends, or other economic benefits. Its only utility is to participate in platform governance voting.

However, this “governance” utility may only be an illusion in reality. Given that insiders hold a large and highly concentrated share of tokens, the results of any community vote have essentially been predetermined. The founding team and their allies will always have enough votes to dominate any decision-making. Therefore, for ordinary retail investors, the “governance” function is essentially meaningless. The true purpose of the token is not decentralized governance, but rather as a tradable speculative asset. Its value derives entirely from market sentiment and the branding effect of Trump, while its price dynamics are precisely managed by the project team through controlling the pace of supply release.