Trump-Linked Crypto Venture Under Scrutiny After Alleged Investor Abandonment in DeFi Hack Scandal
Donald Trump’s crypto venture, World Liberty Financial (WLFI), is under intense scrutiny after two key partners, Chase Herro and Zak Folkman, allegedly abandoned investors from their previous DeFi project, Dough Finance, following a $2.5 million hack. Dough Finance, launched by Herro and Folkman, was targeted by a flash loan exploit in July 2024, resulting in significant losses of USDC and ETH. Despite initial efforts to recover and return some funds to users, many creditors report they remain uncompensated, with only a small portion of assets recovered. After closing Dough Finance and ceasing communication with affected investors, Herro and Folkman rapidly shifted to co-launch WLFI with Trump, earning at least $65 million, while the Trump family reportedly received around $400 million. Lawsuits have since been filed alleging fraud and breach of fiduciary duty. The documentation for WLFI reportedly shares similarities with materials from Dough Finance, intensifying concerns about trust, accountability, and reputational risk in the crypto sector. This case highlights the ongoing risks and investor skepticism surrounding DeFi platforms and high-profile crypto partnerships, emphasizing the need for thorough due diligence in crypto trading and DeFi investments.
Bearish
News of the Dough Finance hack and subsequent abandonment of investors by WLFI’s key founders raises significant concerns about the trustworthiness of the project and its management. Revelations of lawsuits, lack of investor compensation, and similarities in the WLFI and Dough Finance documentation undermine investor confidence and increase skepticism towards new crypto launches involving high-profile figures like Donald Trump. Such scandals tend to have a negative effect on short-term token demand and price stability for WLFI, as traders become wary of potential risks and legal repercussions. Over the long term, persistent doubts about transparency, governance, and accountability could limit capital inflows and growth potential. Overall, the controversy creates a bearish outlook for both WLFI and associated DeFi projects mentioned.