Trump’s WLFI Acts to Limit Wallet Leak as a Federal Probe Approaches

crypthub

3 days ago

Security Breach and Immediate Response

World Liberty Financial reported that a small group of user wallets were compromised before its platform launch, primarily through phishing attacks or exposed seed phrases. The company froze the affected addresses in September and began KYC verification before returning assets to validated owners. An emergency function burned 166.67 million WLFI tokens (~$22 million) from the compromised address and moved them to a recovery wallet to limit further loss.

Regulatory Scrutiny

Senators Elizabeth Warren and Jack Reed asked the DOJ and Treasury to examine WLFI token sales tied to sanctioned entities, citing a watchdog report linking transactions to North Korea’s Lazarus Group and an Iranian exchange. The inquiry raised questions about whether the wallet compromises are connected to these alleged illicit flows. WLFI has not disclosed the number of affected accounts or the total value of stolen crypto.

Expert Rebuttals and Future Safeguards

Security researchers from MetaMask and Ump.eth criticized the watchdog’s analysis, saying it misidentified on‑chain activity and wrongly associated an innocent user’s wallet with DPRK‑linked transactions, resulting in a $95 k freeze. WLFI emphasized its focus on user protection, confirming that vulnerable wallets will remain frozen until ownership is verified. The firm also announced testing of updated smart‑contract logic aimed at preventing similar breaches in future rollouts.