U.S. Senators are escalating scrutiny of a crypto firm with close ties to the Trump family, urging the Department of Justice and the Treasury to investigate potential links to illicit actors in North Korea and Russia. The move raises significant questions about regulatory oversight in the rapidly evolving digital asset landscape.
In a letter obtained by CNBC and addressed to the Attorney General and Treasury Secretary, Senators Elizabeth Warren and Jack Reed, key members of the Senate Committee on Banking, Housing, and Urban Affairs, expressed concerns that World Liberty Financial (WLF), a crypto venture with significant Trump family involvement, may pose a national security risk. The senators allege that WLF lacks sufficient safeguards to prevent the flow of funds to, or the acquisition of influence by, illicit entities.
The concerns stem from a report by the non-profit corporate watchdog Accountable.US, which alleges that WLF’s $WLFI tokens were sold to “highly suspicious entities,” including traders linked to the North Korean Lazarus Group hacking organization, a sanctioned Russian “Ruble-backed sanctions evasion tool,” an Iranian crypto exchange, and Tornado Cash, a platform known for its use in money laundering.
As of press time, WLF has not responded to CNBC’s request for comment.
The Trump Family’s Role in WLF
World Liberty Financial’s website identifies Eric Trump, Donald Trump Jr., and Barron Trump as co-founders, with former President Donald Trump listed as “Co-Founder Emeritus.” Furthermore, an entity linked to the former President and his family holds a substantial equity stake in WLF, highlighting the family’s deep financial connection to the company.
Following private investment rounds, WLF initiated public trading of its $WLFI “governance token” in September, granting holders the ability to propose and vote on company proposals, as stated on the WLF website. This decentralized governance model, while intended to foster community participation, has raised concerns about the potential for malicious actors to influence the company’s direction.
The Accountable.US report asserts that WLF sold $10,000 worth of $WLFI tokens to traders who had previously transacted with a wallet now sanctioned for ties to the Lazarus Group. This transaction, according to the senators, raises serious national security implications.
Senators Warren and Reed argue that WLF’s acceptance of funds from entities with “open and obvious connections to enemies of the U.S.” creates unacceptable national security risks, effectively giving these entities “a seat at the table” to influence WLF’s governance and potentially undermining U.S. interests.
Illicit Activity Concerns and Conflict of Interest
WLF’s ambitious plans for expansion, including the launch of debit cards and tokenized commodity assets, have further heightened concerns among regulators and lawmakers. These planned expansions, coupled with the reported token sales to problematic entities, “indicate an absence of robust sanctions and anti-money laundering controls,” according to the senators’ letter. They argue that “WLF risks supercharging illicit finance activity.”
The senators also highlight a potential conflict of interest for current administration officials due to the Trump family’s close ties to the company. “The Trump family’s close ties to the company also create a financial conflict of interest for Trump Administration officials that report to the President: prioritizing token sales will directly enrich the Trump family — while compliance activities may interfere with this wealth creation.”
DT Marks DEFI LLC, an entity connected to Donald Trump and certain family members, reportedly holds a significant portion of the $WLFI token supply, estimated at 22.5 billion tokens valued at over $3 billion, and is entitled to a substantial share (75%) of the proceeds from $WLFI token sales, according to the senators’ letter. This financial arrangement means that each token sale directly benefits the Trump family, even when those sales are to entities with alleged connections to North Korea and Russia.
In a separate report, Accountable.US estimates that a significant portion of Trump’s net worth is tied to his cryptocurrency ventures, including the launch of the $TRUMP memecoin. A recent financial disclosure reportedly showed that Trump’s foray into crypto has contributed significantly to his wealth.
The senators’ letter also emphasizes the urgency of addressing these issues as Congress deliberates on new crypto regulations that could potentially shield governance tokens like $WLFI from existing U.S. oversight and exempt issuers from certain recordkeeping and disclosure requirements. They stress the need to ensure that crypto interests do not profit at the expense of U.S. national security and that illicit actors are not given access to financial platforms that they can exploit.
The Democratic senators, Warren and Reed, have requested that the Treasury and the Justice Department outline information related to potential enforcement actions against World Liberty Financial by December 1st.
Neither the Treasury nor the Department of Justice has yet responded to CNBC’s request for comment.
A History of Scrutiny
Senator Warren, a prominent member of the Senate Committee on Banking, Housing, and Urban Affairs, has long been a vocal critic of the crypto industry and Trump’s embrace of digital assets. She has previously questioned World Liberty Financial about its business practices, including its stablecoin, USD1.
USD1, which is reportedly backed by U.S. dollars and short-term Treasuries, has gained traction through its use by the U.A.E.-backed investment fund MGX for a substantial investment into Binance. This investment facilitated a significant boost in USD1’s transaction volume and overall market presence, however, that deal is also facing scrutiny.
The New York Times reported in September that the UAE secured a significant chip deal from Washington shortly after the MGX-Binance deal surrounding USD1 was completed, raising questions about potential quid pro quo arrangements and undue influence.
Adding another layer of complexity, Trump recently pardoned Binance founder Changpeng Zhao, who had previously pleaded guilty to charges related to facilitating money laundering on the cryptocurrency exchange. Despite granting the pardon, Trump later stated that he “knew nothing about Zhao.”
The Wall Street Journal has reported that Binance not only played a role in facilitating MGX’s investment using USD1 but also provided technical assistance in developing the stablecoin itself, according to anonymous sources, however, Binance CEO Richard Teng has refuted these claims, denying any involvement in MGX’s investment decision.
Donald Trump Jr. and World Liberty Financial’s CEO Zach Witkoff have dismissed concerns about conflicts of interest within the Trump administration as “complete nonsense,” attempting to downplay the potential for undue influence. “Don and my World Liberty mission is big, but our dads’ mission is much bigger. They’re not focused on stablecoins, nor are they involved in a stablecoin business,” said Witkoff.
Original article, Author: Tobias. If you wish to reprint this article, please indicate the source:https://aicnbc.com/13081.html
