World Liberty Financial borrowed about $75 million in stablecoins by pledging its own WLFI token as collateral on the Dolomite platform, raising concerns over risk concentration and governance.
The transactions pushed Dolomite’s USD1 lending pool close to full utilisation, with more than $40 million routed to Coinbase Prime, limiting withdrawal access for other depositors.
The structure drew scrutiny as WLFI used its own token to borrow its own stablecoin from a protocol advised by Dolomite co-founder Corey Caplan, highlighting potential conflicts of interest.
Onchain data shows nearly 2 billion WLFI tokens have been deposited as collateral, contributing to roughly $31.4 million in stablecoin borrowing across multiple transactions.
The USD1 pool reached utilisation levels above 90%, meaning depositors may be unable to withdraw funds until the large borrower repays, increasing liquidity risk.
Concerns are also centred on collateral quality, as WLFI’s thin market liquidity could trigger sharp price declines if liquidations occur, potentially leaving the protocol with bad debt.
The episode underscores broader risks in decentralised finance, particularly where insider-linked structures and concentrated positions can expose retail users to systemic losses.
At the time of reporting, World Liberty Financial price was $0.08634.