Justin Sun sues Trump-backed World Liberty over frozen tokens
Crypto billionaire Justin Sun, owner of the world’s most expensive banana, was named an adviser to World Liberty Financial the day after investing $30 million in the project. (He’d later boost that with $45 million more.) Sun has long been a supporter of President Trump, and has not once, but twice topped a competition to amass the most $TRUMP coins. But it seems even for Sun, the gold has turned brass.
Sun announced on social media that he’s filed a lawsuit in a California federal court against the crypto project backed by Trump.
The lawsuit alleges World Liberty engaged in an “illegal scheme to seize property” and “positioned itself as the new boogeyman” by stripping Sun of his governance rights, threatening to burn his WLFI tokens, and freezing his stash, which at times were worth $1 billion, according to the complaint dated on Tuesday.
“I have tried in good faith to resolve this situation with the World Liberty project team without resorting to litigation,” Sun wrote in a lengthy X post on Tuesday night. “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.”
The complaint also alleged that World Liberty appears to be in financial trouble, citing concerns over whether the project can repay an on-chain loan that was collateralized by using, at the time, $5 billion worth of WLFI. The token reached an all-time low less than two weeks ago.
Despite the escalation with World Liberty, Sun said the lawsuit does not change his feelings about Trump or his administration. “I have always been — and remain — an ardent supporter of President Trump and his Administration’s efforts to make America crypto friendly,” he said.
The lawsuit alleges World Liberty engaged in an “illegal scheme to seize property” and “positioned itself as the new boogeyman” by stripping Sun of his governance rights, threatening to burn his WLFI tokens, and freezing his stash, which at times were worth $1 billion, according to the complaint dated on Tuesday.
“I have tried in good faith to resolve this situation with the World Liberty project team without resorting to litigation,” Sun wrote in a lengthy X post on Tuesday night. “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.”
The complaint also alleged that World Liberty appears to be in financial trouble, citing concerns over whether the project can repay an on-chain loan that was collateralized by using, at the time, $5 billion worth of WLFI. The token reached an all-time low less than two weeks ago.
Despite the escalation with World Liberty, Sun said the lawsuit does not change his feelings about Trump or his administration. “I have always been — and remain — an ardent supporter of President Trump and his Administration’s efforts to make America crypto friendly,” he said.
On Saturday, ethereum-based protocol KelpDAO, known for liquid restaking, was exploited for $290 million, the largest hack of 2026 in the decentralized finance ecosystem.
“Preliminary indicators suggest attribution to a highly-sophisticated state actor, likely DPRK’s Lazarus Group,” LayerZero said in its statement explaining the attack. KelpDAO issues rsETH, while LayerZero provides network infrastructure that allows users to move KelpDAO’s rsETH between blockchains.
The configuration of KelpDAO’s exploited application, powered by LayerZero, relied on a single decentralized verifier network (DVN), responsible for verifying the integrity of cross-chain messages.
The industry best practice is for protocols to use a multi-DVN setup to prevent a unilateral point of trust or failure. “A properly hardened configuration would have required consensus across multiple independent DVNs, rendering this attack ineffective even in the event of any single DVN being compromised,” LayerZero stated, essentially placing the blame on the restaking protocol for using a single-DVN setup.
The exploiters executed an RPC-spoofing attack and performed DDoS attacks to manipulate the single DVN instance into confirming transactions “that never in fact took place.” The LayerZero team said, “Operating a single-point-of-failure configuration meant there was no independent verifier to catch and reject a forged message.”
Meanwhile, KelpDAO is preparing to dispute LayerZero’s account and place the blame on the latter, per a CoinDesk report.
Spilling over
The exploit has since impacted the wider crypto landscape.
The attackers successfully drained 116,500 rsETH from KelpDAO’s bridge, allowing them to deposit $249.7 million of the token to DeFi’s largest lending protocols and withdraw $228.2 million worth of different cryptocurrencies, wETH and wstETH, on-chain data from Arkham Intelligence shows.
Aave, the largest lending protocol, has frozen several markets and is now facing a liquidity crunch.
On Aave’s v3, the ETH, USDT, and USDC markets, which have a combined reserve size of $10.7 billion, have each reached a 100% utilization rate, as total borrowed equals total supplied. When borrows are maxed, users cannot withdraw their supplied liquidity.
The pseudonymous head of strategy at DeFi lending platform Spark, @MonetSupply, wrote on X, “There has been a ~$300 million increase in borrowing with USDT collateral in just the past day since the rsETH exploit.”
On-chain folks are spooked
The attack comes in the same month that Drift, a solana-based trading venue, suffered from an over $270 million hack. Saturday’s attack also follows worries stemming from Anthropic’s unreleased AI model Mythos, which “is capable of identifying and then exploiting zero-day vulnerabilities in every major operating system.”
Even though the major cryptocurrencies have not seen their prices move substantially in the last 24 hours, crypto participants have been spooked, evident by the capital exiting the decentralized finance ecosystem.
DeFi saw its total value locked decrease by $13 billion over the weekend to $85.64 billion at the time of writing, its lowest point since April last year, data from DefiLlama shows.
“OK — Kelpdao hacker, how much you want? Let’s just talk. With KelpDAO’s help, of course. It’s simply not worth it to sacrifice both Aave and KelpDAO and let them go down over this hack. You can’t spend $300 million anyway,” said Justin Sun, founder of the Tron blockchain, who has been beefing with the President Trump-backed World Liberty team.
Bitcoin jumps to highest level since February, boosted by optimism over reopening of Strait of Hormuz
Bitcoin finally broke out of the tight range it’s been stuck in for weeks, rising to just below the $78,000 mark, a level not reached since early February, as risk-on sentiment floods back into the market.
The jump comes on the heels of Iran and the US announcing the reopening of the Strait of Hormuz on Friday morning, which sent oil prices down and the stock market higher.
The renewed optimism for a deal with Iran and the end of the Middle East conflict also sent crypto stocks jumping, with Strategy, the largest corporate bitcoin holder, up more than 13% late Friday morning.
Wave Digital Assets’ head of international portfolio management, Rajiv Sawhney, told Sherwood News that it’s all about the Strait of Hormuz. “Markets are interpreting it as a win. It’s a knee-jerk reaction given positioning and expectations. As such, while bitcoin was able to tick higher, the $80K level will be the real barometer we need to cross for me to feel confident that this relief rally has legs,” he said, adding that until then, he’s remaining cautiously optimistic that risk assets can close at these levels.
Nic Puckrin, cofounder of Coin Bureau, told Sherwood that we’re seeing a classic short squeeze as heavy short positions in bitcoin are being liquidated, adding that the next resistance level to watch is $79,000.
“If we get past that and close the week above this level, $90k becomes a real possibility in the medium term. However, if the rally gets rejected at this level, we could remain stuck in the range between $65k and $75k that held bitcoin hostage for months,” Puckrin added.
Underscoring the cautious comeback, Bloomberg reported that from a derivatives market perspective, “traders remain largely defensive.”
“Funding rates for perpetual futures contracts, a key measure of whether leveraged traders are betting on higher or lower prices, were negative. Hefty premiums are also being paid for put options providing downside protections at $60,000 and $50,000, respectively,” Bloomberg reported.
Bitfinex analysts told Sherwood that the liquidation heat map shows dense shorts leverage stacked between $76,000 and $78,000.
“Clearing this range opens a substantial air gap in the unspent realized price distribution up to $82,000,” they said, adding that the next level they are watching is $83,000, a “significant wall at the short-term holder realized price.”
OP token rises after payments card provider Ether.fi finalizes migration to the layer 2 network
OP, the governance token for OP Mainnet, has increased as much as 5% since Tuesday night following news that Ether.fi, a decentralized finance protocol known for providing noncustodial crypto payment cards, completed its migration to the ethereum layer 2 blockchain network.
Ether.fi’s move resulted in around $220 million in total value locked coming to OP Mainnet, the largest single TVL event in the network’s history, as well as over 70,000 payment cards and more than 300,000 accounts, according to a blog post from Ether.fi.
Originally on alternative layer 2 network Scroll, Ether.fi made the switch to OP Mainnet due to lower median transaction fees of $0.00001 and sub-250-millisecond finality times.
“To ship what comes next, we needed infrastructure that could handle real-time payments at consumer volume,” Ether.fi CEO Mike Silagadze told Sherwood News. “OP Mainnet delivered on every dimension. Three days to migrate $220M with no downtime answered the question. Now we get to build.”
The migration comes about two months after Coinbase-incubated blockchain Base announced moving away from Optimism’s OP Stack.
Ethereum climbs to highest point since end of January
Ethereum has rallied 8% in the last 24 hours to trade just under the $2,390 level, liquidating over $151.7 million worth of ethereum short positions in the period.
The last time ethereum was at its current level was the last day of January, data from CoinGecko shows.
According to Jim Hwang, COO of investment company Firinne Capital, ETH has been acting as a risk asset: declining in times of heightened uncertainties such as the conflict in Iran, inflation expectations, and diminished rate cut hopes.
“Only in the last 24+ hours when these uncertainties have diminished are we seeing prices lift again. We can feel a bit of optimism but to the extent that this cease fire remains tentative, we should probably view the current ETH price gains with caution,” Hwang told Sherwood News.
A GlassNode senior analyst, who maintains the pseudonymous X account CryptoVizArt, said on X that ethereum has “reclaimed the one-to-three month holder cost basis at around $2,300. So far, this structure is consistent with a bear market relief rally, comparable to the bounces observed in Q3-Q4 2022, rather than a structural trend reversal.”
Tom Lee, chairman of ethereum treasury firm BitMine Immersion Technologies, said ethereum’s performance since the start of the Iran conflict demonstrates how the cryptocurrency is a “wartime store of value,” per the firm’s press release on Monday, in which it announced acquired 71,524 additional tokens worth $170.5 million. That brings its total stockpile to nearly 4.9 million tokens, or 4% of the total supply of ethereum.
That said, the founder of venture capital firm Kenetic, Jehan Chu, told Sherwood, “It’s clear that regaining ATH [all-time high] will take real-world revenue-generation, and not just a Tom Lee narrative.”
Crypto industry lifts on news of Iran ceasefire
News of a ceasefire between the US and Iran has sent cryptocurrencies and digital asset equities rallying, with privacy-focused token Zcash jumping 27% in the last 24 hours and leading market gains.
The price swing, which helped boost the total crypto market capitalization by 4.8% in the period, has resulted in $474.7 million in short positions liquidated worldwide, data from CoinGlass shows.
Since the ceasefire was announced:
Altcoins and memecoins including ethereum, XRP, trump and hype are in the black.
Ethereum treasury firms BitMine Immersion Technologies, SharpLink Gaming, and Bit Digital are up in early trading, as are solana treasury firms Upexi and DeFi Development Corp.
Circle, known for the second-largest stablecoin, USDC, and crypto liquidity provider Galaxy Digital, which is also developing its data center business, are both up on Wednesday morning.
Bitcoin treasury firms Strategy, Strive Inc., and American Bitcoin are catching a bid as bitcoin rises.
Crypto trading venues Coinbase and Robinhood have both benefited from rising crypto markets and general market risk-on sentiment.
(Robinhood Markets Inc. is the parent company of Sherwood Media, an independently operated media company subject to certain legal and regulatory restrictions.)
The FBI revealed in a Monday press release that Americans submitted 181,565 complaints of schemes involving cryptocurrency and reported losses totaling around $11.4 billion last year, a 22% increase from 2024.
The age range most affected were people older than 60. Those in this category had the highest crypto complaint count at 44,555 with losses at $4.4 billion, per the annual report from the Internet Crime Complaint Center, a division of the FBI tasked with gathering intelligence on cybercrime.
One cybercrime the report pointed to was cryptocurrency investment fraud, which are sophisticated long-term scams using psychological manipulation, an appearance of legitimacy, and exploitation of cryptocurrencies to deceive victims into investing large sums of money.
“These scams are largely perpetrated by organized criminal enterprises based in Southeast Asia using victims of human trafficking as forced labor to run the scam operations,” per the report.
The FBI report comes as the crypto ecosystem is still reeling from a recent $270 million exploit that was planned six months in the making, a change from the initial estimate of multiple weeks.