Sun alleges USD1’s $4 billion collateral may be inaccessible to users amid legal dispute over solvency and backdoor controls.
Justin Sun accused World Liberty Financial of embedding “backdoor functions” in its USD1 stablecoin, enabling the project to freeze or destroy user assets. The claims emerged after a California federal judge rejected World Liberty’s bid to move the dispute into confidential arbitration, keeping Sun’s personal claims public.
USD1’s reported $4 billion market capitalization is allegedly backed by collateral that belongs to users, not the project, according to Sun. He questioned World Liberty’s solvency, stating no evidence shows the firm holds sufficient capital outside user assets to cover potential liabilities or judgments.
World Liberty has not responded to Sun’s allegations, which follow a legal victory for Sun’s team in keeping the case in open court. The dispute raises concerns over stablecoin transparency and asset control mechanisms.