Trump-Backed Crypto Project Faces Federal Lawsuit After Allegedly Freezing Justin Sun’s Tokens

The post Trump-Backed Crypto Project Faces Federal Lawsuit After Allegedly Freezing Justin Sun’s Tokens appeared first on Coinpedia Fintech News

Justin Sun has filed a lawsuit in a California federal court against World Liberty Financial, a DeFi project backed by Eric Trump and Donald Trump Jr., over a dispute involving frozen tokens and governance control.

Sun says the issue began when the team froze all his WLFI holdings, removed his voting rights, and allegedly threatened to permanently burn his tokens. He calls this the breaking point.

He also says he tried multiple times to resolve the matter privately, but the team refused to unfreeze his tokens or restore his rights, leaving him with no option but to move to court.

“I have tried in good faith to resolve this situation with the World Liberty project team without resorting to litigation. But the project team has refused my requests to unfreeze my tokens and restore my rights as a token holder. They have left me with no choice but to turn to the courts.”

Frozen Tokens and Lost Control

Sun’s main issue is control over his tokens. He says his WLFI holdings are locked, and he’s fully excluded from governance decisions. He argues there was no clear explanation or justification for the freeze, and that being locked out also prevents him from voting on matters affecting his own investment. 

He adds that he was once a major early backer of the project but is now in direct conflict with it.

Governance Proposal Adds Pressure

However, the dispute intensified after a governance proposal from World Liberty Financial introduced stricter rules, including:

• A 10% advisor token burn requirement
• A 2-year cliff plus 2-year vesting for early investors
• Indefinite token locks for users who don’t explicitly accept the terms

Sun criticized this setup, saying it effectively forces investor compliance, especially since frozen holders cannot vote against the proposal in the first place.

Smart Contract Allegations and Backlash

Tension increased further when Sun alleged that the WLFI smart contract may contain a hidden blacklisting function capable of freezing or restricting tokens at will. He raised concerns about transparency and control within the system.

WLFI rejected these claims, accusing Sun of “playing the victim” and making baseless allegations, while also suggesting potential legal action against him, turning the dispute into a full standoff.

Political Context and Court Battle

Despite the lawsuit, Sun clarified that his support for U.S. President Donald Trump and the administration’s pro-crypto stance remains unchanged. He stresses that the dispute is strictly with the project team, not political leadership.

As both sides refuse to back down, the case has now moved into the legal system, raising wider questions about investor rights, governance power, and control in politically linked crypto projects.