The governance token of World Liberty Financial (WLFI), the Trump family's crypto venture, has plunged 87% from its all-time high of around 46 cents to roughly 6 cents. The collapse comes as AI Financial, a Nasdaq-listed crypto payments firm, reported a $271 million quarterly net loss largely tied to a write-down of its WLFI holdings, alongside a going-concern warning from the SEC.
The token's design and the write-down
WLFI is a pure governance token with no claim to dividends, rewards, airdrops, or any financial interest in WLF LLC or its affiliates. It also does not entitle holders to interest earned on collateral backing the platform's fiat-backed stablecoin, USD1. This limited utility partly explains the token's steep decline, which has drawn attention from critics including Senator Elizabeth Warren, who has been vocal about potential conflicts of interest.
AI Financial, formerly known as Alt5 Sigma, disclosed the write-down in its quarterly report, flagging the SEC's going-concern warning that raises doubts about the company's ability to continue operating. The firm's exposure to WLFI highlights the risks of holding tokens with no economic rights beyond governance.
Broader market context
The token's slump coincides with a nervous start to the week for markets, as additional strikes against Iran and upcoming inflation data (CPI) keep investors on edge. Bitcoin and other major cryptocurrencies have also faced pressure, though WLFI's decline far outpaces the broader market.
World Liberty Financial positions itself as a DeFi gateway to third-party applications, but the token's design and the Trump family's involvement have made it a target for regulatory scrutiny. The situation underscores the challenges facing politically-linked crypto projects as lawmakers and regulators increasingly focus on the space.