Trump-backed crypto project fails to take off

In the heat of the US presidential race, Republican Donald Trump promoted a crypto project, where he is listed as “Chief Crypto Advocate,” by calling it “Huge.” However, two weeks into the project’s token sale, it appears to be a huge flop, with no clear information on what might happen next.

World Liberty Financial (WLF) is meant to be a decentralized finance (DeFi) platform. First appearing in news media in August of this year, the project’s composition and purpose remain largely unknown. The most recent, unconfirmed reports suggest that WLF is working on its own stablecoin.

Despite this, on October 16th, the project launched its token sale, WLFI, publicly aiming to raise around $300 million by selling 20% of the token supply. If everything went according to plan, the platform – still lacking a clear business model or details on its services – would be valued at $1.5 billion.

However, two weeks into the sale, less than 5% of the 20 billion tokens available have been sold, raising about $14 million. In theory, some of the tokens may have been sold directly, bypassing the website.

According to the project’s website, new sales are still ongoing. On October 23rd, WLF claimed that more than 15,000 people owned the token. According to a filing by WLF on October 30, the project currently plans to sell only up to $30 million in tokens before terminating the sale.

Today’s the day! @WorldLibertyFi token sale is live. Get your $WLFI tokens now. Purchase $WLFI here: https://t.co/jg1tOaHHBy pic.twitter.com/j8ewxa13wp

undefined Donald J. Trump (@realDonaldTrump) October 15, 2024

Industry observers have pointed out multiple reasons why the sale hasn’t gained traction. For example, Kain Warwick, founder of Infinex, a DeFi project that recently raised $67 million by selling its NFT (non-fungible token) collection, noted in a recent livestream on X that crypto investors today are more focused on meme coins rather than token sales.

According to Warwick, if this sale had taken place during the 2017 initial coin offering (ICO) craze, WLF would have likely raised a billion. Indeed, during that time, some crypto projects raised billions even before launching and proving their investment potential.

However, analysts cite the project’s tokenomics and numerous unknowns as additional reasons for the token launch's failure.

The world of unknowns

Firstly, it remains unclear what a token buyer gains from holding the WLFI token. According to the project’s Terms and Conditions, the sole utility of holding $WLFI is governance – token holders "have the power to propose and vote on proposals that will shape the future of the World Liberty Financial Protocol."

However, token holders receive no economic or other rights, such as fees generated by the WLF Protocol or company earnings. Furthermore, the tokens are non-transferable, cannot be used for payments, and are locked indefinitely in a wallet or smart contract. Also, most likely for legal reasons, WLF warns buyers not to expect any increase in token value “as a result of any future functionality or the success” of the WLF Protocol.

In other words, at present, holders have virtually no utility with the token, and the project has not indicated when this might change, if at all.

“Perhaps it’s not surprising that WLFI tokens haven’t been flying off the shelf, as the financial incentives for holding the WLFI token are not entirely clear,” a user commented in the WLF governance forum.

On the same forum, however, some argue that making the token non-transferable is “just legal protection” and that “a simple vote makes the tokens tradeable, which could happen right after governance goes live,” adding that “it would be quite dumb for insiders if they could never cash out.”

Meanwhile, other red flags have included DT Marks DEFI LLC, a Trump family-affiliated entity, securing rights to receive 75% of net protocol revenues and approximately $338 million in WLFI tokens.

Additionally, Axiom Management Group, a Puerto Rican LLC owned by Chase Herro and Zachary Folkman, has the right to receive 25% of the net protocol revenue, although WLF claims the group has agreed to allocate half of this sum to WC Digital Fi LLC, affiliated with Steve Witkoff and certain family members.

Witkoff is known as an American real estate investor, landlord, and founder of the Witkoff Group, while Folkman and Herro reportedly face various lawsuits, and their other DeFi project, Dough Finance, lost around $2 million to a hack this past summer.

Moreover, previous reports in crypto media have suggested that the WLF protocol is largely based on Dough Finance’s code.

Descriptive titles

The Trump family’s involvement is also not fully clear. Donald Trump's sons Eric, Donald Jr., and Barron are listed as "Web3 Ambassadors" for the project, while the former President himself holds the title "Chief Crypto Advocate."

However, the project clarifies that these titles are only "descriptive" for team supporters and do not imply employment. They admit they aim to “leverage the global reach and recognition of the Trump brand to bring as many Web2 users into Web3 as possible.” How this will be impacted should Trump win a second term in the White House is also unclear.

The project’s marketing claims also did not fully align with reality. Donald Trump touted DeFi as the future using the "BeDeFiant" hashtag, while the project itself claims its mission is to “democratize access to financial opportunities while fortifying the global status of the US Dollar.” However, WLFI token buyers were subject to standard regulations, such as know-your-customer (KYC) procedures. Additionally, in the US, only accredited investors could participate in the sale, although it was open to everyone else internationally.

NOTHING SAYS “DEFIANT” LIKE KYC FOR A SHITCOIN TOKEN SALE AM I RIGHT https://t.co/Dsyt7mQwaF pic.twitter.com/0XBMOwZYUh

undefined Walker⚡️ (@WalkerAmerica) September 30, 2024

In either case, Kathleen Breitman, CEO of another blockchain project, Tezos, told CNBC that the only real differentiator of WLF among other DeFi lending protocols is the fact that a presidential candidate backs it.

However, since the WLFI sale went live, “Chief Crypto Advocate” Donald Trump has remained relatively quiet about the project, at least on the X platform.

Cybernews has contacted World Liberty Financial for comment and will update the article if answers are received.