Justin Sun has secured a procedural win in his legal dispute with World Liberty Financial (WLFI). A California federal judge rejected the company’s attempt to move Sun’s individual claims into confidential arbitration.
Judge James Donato ruled that Sun’s personal claims can remain in public court. The decision does not determine whether Sun’s allegations are valid. However, it means his claims will continue through the court system, rather than being handled entirely behind closed doors.
Sun Alleges WLFI Restricted His Tokens
Sun claims he invested $45 million in WLFI. Furthermore, he alleges that the project’s smart contracts give it the ability to freeze, restrict or burn tokens.
He said, “Token holders deserve to see how projects treat the people who trust them.”
He claims those controls were used against his wallet. He has also raised concerns about similar functions in USD1, WLFI’s stablecoin.
He said, “World Liberty has given itself the technical ability to freeze or destroy their assets at any time,”
Sun has described these features as “backdoor functions.” He is alleging they could allow token holdings to be frozen or destroyed without notice.
He has also questioned whether WLFI has enough funds to cover potential claims. Sun argues that the assets backing USD1’s reported $4 billion market capitalization belong to users. Therefore, they should not be treated as company capital available to pay potential judgments.
Sun said he has not seen evidence that WLFI has sufficient additional capital to cover possible liabilities. He urged investors to exercise caution.
WLFI Rejects Sun’s Claims
WLFI has denied Sun’s allegations. Co-founder Zach Witkoff has called the claims “entirely meritless.”
WLFI has also filed a counterclaim in Florida accusing Sun of defamation and improper transfers.
Meanwhile, WLFI continues to expand its business. The project recently appointed a new chief business officer for USD1 and is pursuing an artificial intelligence partnership with WorldClaw.
Separate Claims Over $75 Million
Crypto investigator Hunter Biden has separately alleged that WLFI seized Sun’s $75 million investment. He also claims WLFI borrowed $75 million using its own token as collateral.
Biden compared the alleged structure to the type of circular leverage associated with the collapse of FTX. These claims have not been established as findings by a court.
He also highlighted WLFI’s reported preliminary conditional approval from the Office of the Comptroller of the Currency to become a national trust bank.
Biden further pointed to an Abu Dhabi-linked entity’s reported 49% stake in WLFI. He also pointed to a separate UAE-based fund’s reported $100 million investment in the project. These claims also remain allegations.
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