Justin Sun Sues Trump-Backed World Liberty Financial Over Frozen Tokens

Justin Sun is taking the Trump family’s crypto venture to federal court.

The Tron founder filed suit Tuesday in California against World Liberty Financial, tweeting that the project froze his tokens, stripped his voting rights, and threatened to permanently destroy his holdings, without notice, cause, or recourse.

“They have left me with no choice but to turn to the courts,” Sun tweeted, noting that he does not believe U.S. President Donald Trump “would condone these actions if he knew about them.”

The case puts one of crypto’s most controversial investors on a collision course with one of the industry’s most politically connected projects.

Sun became World Liberty’s single largest token holder after spending $75 million on WLFI in late 2024.

Last September, World Liberty blacklisted his wallet after he appeared to move portions of his holdings, an action potentially prohibited under his investment terms, with Sun denying any intent to sell.

“All I want is to be treated the same as every other early investor who received tokens—no better, no worse,” he said Tuesday.

Decrypt has reached out to Sun and World Liberty Financial for comment.

Months-long feud

The dispute turned public earlier this month when Sun accused World Liberty of embedding a secret backdoor in the smart contract governing WLFI, allowing it to freeze any holder’s tokens without notice or recourse.

He labeled World Liberty’s leadership “bad actors,” accusing the project of treating “the crypto community as a personal ATM,” while the firm dismissed his claims as baseless.

Sun also opposed a new governance proposal imposing a two-year cliff and vesting schedule, saying frozen tokens prevent him from voting, as holders risk indefinite lock-ups if they don’t accept.

Experts told Decrypt that the case turns on the gap between how World Liberty marketed WLFI and what its smart contracts actually permit.

The defensibility weakens sharply “when a token is marketed as a decentralised ownership stake, but the contract grants an admin power to confiscate unilaterally,” Yuriy Brisov, Partner at Digital & Analogue Partners, told Decrypt. “Burying a function in bytecode is not disclosure.”

“The standard under both U.S. and EU consumer-protection law is ‘clear and conspicuous’—the power has to appear in the materials a reasonable investor actually reads, in plain language, before purchase,” he added.

Joshua Chu, lawyer and co-chair of the Hong Kong Web3 Association, told Decrypt that invoking AML and sanctions-type powers on-chain requires controls that are “transparent, rule-based and applied consistently, not selectively against a single controversial whale.”

Chu said it will be important to establish “whether there was a genuine law-enforcement or policy-based rationale behind the freeze, or whether this was a case of centralized discretion being exercised inside something that is marketed as DeFi.”

He added that WLFI is likely to hold its ground, saying, “I’d expect them to double down on a narrative that this was a contractual, risk-based compliance action, not arbitrary punishment.”

Even Alex Chandra, a partner at IGNOS Law Alliance, told Decrypt the court will likely ask whether investors were treated fairly and equally, or whether governance rights could be “unilaterally altered after a triggering event.”

“On paper, the same legal standards apply to WLFI as to any other issuer,” Brisov noted.

The real exposure for World Liberty, he said, lies in three areas: private civil litigation, state attorneys general with consumer-fraud authority operating independently of federal politics—New York and California in particular—and non-U.S. regulators deciding whether the token can be marketed in their jurisdictions.

WLFI token is currently trading at around $0.08, down nearly 76% from its September all-time high of $0.33, according to CoinGecko data.