WLFI’s DeFi credentials under fire after Sui partnership

Sui, a layer-1 blockchain developed by San Francisco-based Mysten Labs, announced on March 6 that it had partnered with World Liberty Financial (WLFI). As part of the deal, Sui’s native token, SUI (SUI), will be included in WLFI’s “Macro Strategy” strategic token reserve, and both entities will explore product development opportunities together.

WLFI, a decentralized finance (DeFi) protocol, has drawn controversy due to its ties to the family of US President Donald Trump. While WLFI insists that none of Trump’s family members hold an officer or director position, Eric Trump serves as one of the board managers.

Additionally, despite marketing itself as a DeFi innovator, WLFI relies on Aave v3 for lending and borrowing functions, leading to questions about its originality and independence.

Sui’s inclusion in WLFI’s reserve is not entirely unexpected, as Eric Trump, the president’s son, has publicly expressed support for and personally holds the cryptocurrency.

The network is coming off a successful 2024 campaign, with its market capitalization surging over 153% in the last quarter, according to Messari. DeFi activity on Sui has also been on the rise, with its average decentralized exchange (DEX) volume skyrocketing 1,591% year-over-year. It currently ranks among the top 20 cryptocurrencies and is a top-10 blockchain in decentralized finance (DeFi) by total value locked (TVL), standing at $1.283 billion, according to DefiLlama. 

The Sui community and its development team largely celebrated the partnership. However, industry participants voiced concerns over WLFI’s legitimacy and business model.

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Industry raises concerns over WLFI in reaction to Sui partnership

Criticism of WLFI has centered on skepticism about its value proposition. Many community members question whether it brings anything new to DeFi or if it is merely repackaging existing Aave services under a different brand.

Mike Dudas, managing partner at crypto venture fund 6MV and a self-identified WLFI investor, dismissed the project as a “pay-to-play” scheme.

Andre Cronje, co-founder of Sonic Labs and a key figure in DeFi as the creator of Yearn.finance, leveled even harsher criticism. He highlighted high fees and questionable reinvestment strategies that extract value from crypto firms rather than providing genuine utility.

“Alan,” chief marketing officer of Axia8 Ventures, echoed these concerns, stating:

“Projects bend the knee and pray to the gods in hopes that by playing this game, their token might, just might, be included in a reserve. All of the above to do what? To pump the token’s price.”

WLFI has not publicly addressed these criticisms. Cointelegraph reached out for comment but has not received a response as of publication.

Sui market reaction and strategic implications

Following the partnership announcement, SUI’s price surged 12%, briefly approaching the $3 mark before settling at around $2.85, representing a 5.7% gain from pre-announcement levels.

Zak Folkman, co-founder of WLFI, said in the announcement that Sui was selected for its “American-born” innovation and scalability. Some investors view this as a sign that WLFI’s next move will be to target other US-based crypto projects, especially those with Eric Trump’s implicit endorsement.

In a December interview, Eric Trump revealed that he holds SUI, further fueling speculation about its favorability within WLFI’s ecosystem.

Folkman added:

“Given our plans to support foundational DeFi assets in the coming months, collaborating with Sui was an obvious decision.”

Sui’s object-centric data model and parallel transaction execution make it an appealing infrastructure for DeFi applications. Unlike traditional account-based models, Sui structures assets as independent objects, enabling faster ownership transfers and instant updates without requiring full network-wide consensus. This design enhances liquidity movement, collateral management and smart contract efficiency in DeFi.

WLFI’s holdings and ETF speculation

Onchain data suggests WLFI holds around $80 million in crypto assets, based on wallets tracked by Arkham Intelligence. However, a significant portion of its holdings has been transferred to Coinbase Prime, making it difficult to trace its full asset distribution.

On March 6, onchain analyst EmberCN estimated that WLFI holds a total of $336 million in crypto, including Ether (ETH), Wrapped Bitcoin (WBTC), Tron (TRX), Chainlink (LINK), Aave (AAVE), Ethena (ENA), MOVE, Ondo (ONDO) and Sei (SEI). The analyst also noted that the firm recently added $21.5 million in WBTC, ETH and MOVE ahead of the White House Crypto Summit on March 7.

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“Because these assets were transferred to Coinbase Prime by WLFI some time ago, there is no way to know whether they have been sold,” EmberCN wrote in a translated post, adding that WLFI claims they have not been liquidated.

If WLFI still holds these assets, the current paper loss stands at approximately $88 million. The largest percentage loss is in ENA (-63%), while the largest monetary loss is in ETH (-$67.35 million, down 31%), EmberCN added.

Sui, meanwhile, has hinted at growing its presence in Washington, DC. On Feb. 4, Mysten Labs co-founder Adeniyi Abiodun revealed the project was engaging in “exciting conversations” that could expand its ecosystem. A month later, Abiodun suggested that SUI could be considered for ETF inclusion. On March 6, a Delaware filing indicated that Canary Capital may be exploring an ETF for SUI, though past fake ETF filings have made the industry wary of premature speculation.

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