The crypto platform supported by the Trump family, WLFI, founder account hacked causing a brief disconnect from $USD1, with $WLFI dropping over 8%. Officials emphasize that reserve and redemption mechanisms are operating stably.
Founder community account compromised, causing brief disconnect of $USD1 during market hours
The cryptocurrency project World Liberty Financial ($WLFI), supported by the Trump family, experienced a “coordinated attack” on the morning of February 23. This malicious action targeting the $USD1 stablecoin caused short-term price fluctuations across major exchanges.
According to data from TradingView and CoinGecko, the price of $USD1 briefly fell to around 0.9934 or 0.994, deviating about 0.6% from the pegged 1-to-1 fiat rate. On Binance, the world’s largest exchange, panic-driven selling pushed the $USD1 to $USDT rate down to a low of 0.9802.
Image source: TradingView Due to panic, the $USD1 to $USDT rate on Binance briefly touched 0.9802
World Liberty Financial later confirmed on social platform X that several co-founders’ community accounts were hacked and used to spread false information. The official statement emphasized that the attack did not involve any smart contracts or underlying protocol architecture, and all $USD1 funds remain secure and fully backed.
Image source: X/@worldlibertyfi World Liberty Financial confirms that several co-founders’ community accounts were hacked and used to spread false information
Analyst Wise Advice observed that, despite market volatility, on-chain data showed no record of large whale sell orders exceeding 50,000 tokens. Most transactions were small exchanges on the Solana chain, with single trades below 10,000 tokens. This incident highlights the importance of security in community management, as any breach in communication channels can trigger short-term market reactions.
WLFI token plunges 8% amid rumors and market manipulation
In addition to the stablecoin $USD1’s fluctuations, the project’s governance token WLFI also faced severe tests. During the attack, reports circulated that certain entities paid influencers (KOLs) to spread fear, uncertainty, and doubt (FUD) on social media. Meanwhile, WLFI’s short positions surged, as attackers attempted to profit from the price decline by creating chaos. On the day, WLFI’s price dropped rapidly from 0.117 to around 0.1088, a decline of over 8%, before rebounding to around 0.113 supported by buy orders.
Market sentiment was further unsettled by a warning from well-known on-chain investigator ZachXBT. He previously announced an upcoming report on February 26 about an internal investigation into a high-profit crypto company’s insider trading. Although he did not name names, the community widely speculated that the target was WLFI, closely linked to the Trump family.
Further reading
Is a highly profitable crypto company involved in insider trading? ZachXBT teases a report on 2/26, betting on these 2 platforms
Additionally, co-founder Eric Trump deleted some WLFI-related posts before the attack, which was interpreted as possibly related to regulatory pressure or investigations, fueling further panic. Although officials claim the attack failed, investor confidence in the project’s long-term stability remains cautious.
Reserve transparency and mint-and-redeem mechanisms ensure asset payout security
In the face of the coordinated attack, $USD1 quickly re-pegged within 30 minutes, mainly thanks to its reserve and redemption design. World Liberty Financial states that $USD1 is built according to the GENIUS Act standards, supported by reputable crypto custodian BitGo. Its reserves are fully backed by short-term US Treasuries, USD deposits, and other cash equivalents, maintained at a 1:1 ratio, with regular audits by consulting firm Crowe.
Zach Witkoff, co-founder of $USD1, emphasizes that the stablecoin has high transparency, with reserve status always verifiable, setting a new standard in the stablecoin market.
The development team notes that $USD1 has a robust mint-and-redeem mechanism. When market prices deviate, investors can exchange $USD1 for fiat at a 1:1 rate through the protocol. This arbitrage mechanism effectively absorbs attack shocks, helping the price return to parity after volatility. Currently, $USD1’s market cap remains around $4.8 to $5 billion, ranking fifth among global stablecoins behind $USDT, $USDC, $USDe, and $Dai.
The official reiterates: “While hackers can control social accounts, they cannot interfere with assets protected by smart contracts. This event proves $USD1’s resilience under extreme market conditions.”
Political hurdles in obtaining banking licenses; offshore funds under scrutiny
Even after resolving the attack, World Liberty Financial faces significant political and regulatory pressures. The company is applying through WLTC Holdings LLC to establish a national trust bank to directly custody stablecoin reserves, reducing reliance on third parties. However, politicians led by Senator Elizabeth Warren continue to express concerns, citing potential conflicts of interest due to close ties between the Trump family and the financial industry.
Image source: CNN Politicians led by Senator Elizabeth Warren believe the close ties between the Trump family and the financial sector may involve conflicts of interest
Recent reports indicate that entities linked to the UAE government purchased about 49% of WLFI shares, investing $500 million. The inflow of offshore funds has prompted scrutiny from treasury authorities.
Further reading
Trump’s WLF applies for US banking license! If approved, it will issue, custody, and transfer $USD1 stablecoin independently
Foreign media: UAE controls 49% of WLFI, revealing intertwined relationships with stablecoins and Binance
Moreover, the connection between $USD1 and Binance is also a hot topic. Reports suggest Binance holds about 87% of $USD1’s circulating supply, and the stablecoin was used in a $2 billion UAE investment case. Although CZ (Changpeng Zhao) has stated he has no intention of returning to Binance leadership and has no direct dealings with the Trump family, Binance’s active efforts to promote $USD1 trading pairs on its platform provide significant liquidity for the stablecoin.
As the ZachXBT investigation report approaches release on February 26, the market will continue to watch for potential insider disclosures regarding governance or fund flows. For WLFI, balancing offshore capital, liquidity partners, and US legal compliance will be crucial for the long-term operation of its stablecoin empire.
