Senators Urge Security Probe of Trump-Linked Crypto Firm
Democratic Senators Elizabeth Warren and Jack Reed have called for an investigation into the Trump-linked crypto firm WLFI over potential national security risks. In a letter to the Attorney General and Treasury Secretary, the lawmakers cited a report that WLFI’s governance tokens were sold to blockchain addresses tied to North Korea’s Lazarus Group, sanctioned Russian entities, an Iranian exchange, and Tornado Cash. The senators warn that these token sales may have granted adversaries governance rights and posed security threats.
The Trump-linked crypto firm denied the allegations, stating it performed rigorous AML/KYC checks and rejected millions in failed screenings. WLFI was co-founded by Eric Trump, Donald Trump Jr. and Barron Trump, with a Trump-affiliated entity holding 75% of token sale revenue. Senators also flagged a direct financial conflict of interest and raised concerns about WLFI’s rapid expansion into debit cards and tokenized commodities.
The inquiry stemmed from an Accountable.US report, but blockchain researcher Nick Bax challenged some claims as false positives. Bax found that so-called Lazarus-linked transactions resulted from a joke memecoin contract, not state-backed hacking. He noted that one misidentified investor had its tokens frozen after being wrongly flagged.
The probe into the Trump-linked crypto firm reflects growing regulatory scrutiny and highlights risks in governance token distribution, AML/KYC compliance, and political conflicts of interest.
Bearish
Regulatory investigations into cryptocurrency firms typically weigh on market sentiment. The US senators’ call for a probe of the Trump-linked crypto firm WLFI increases perceived regulatory risk, especially around governance token distribution and AML/KYC controls. In the short term, WLFI token holders may face sell pressure amid uncertainty, and broader altcoin markets could dip as traders become cautious. Similar scrutiny, like the SEC’s action against Ripple or investigations into Terraform Labs, led to price declines. Over the long term, clearer compliance frameworks might bring stability, but until probes conclude, the heightened scrutiny is likely to maintain bearish sentiment.