The Tron founder signed an investment agreement in November 2024, initially committing $30 million before increasing his investment to $45 million. World Liberty Financial pushed back against his claims, as CEO Zach Witkoff contested the version of events Sun gave regarding the restrictions.
Blacklisting powers and sale terms are disputed
The two sides disagree over how World Liberty Financial disclosed its authority to block token transfers. Sun alleges the project added a blacklisting function to $WLFI’s smart contract in 2025 without adequate notice or a governance vote.
World Liberty Financial’s position is that its terms of sale disclosed the freezing powers. Sun contests that account, alleging the relevant terms were inserted secretly after the sale.
The dispute therefore covers both the contract’s technical controls and the terms investors accepted. Sun says the controls unlawfully restricted his holdings; the project maintains that it disclosed its authority.
Defamation countersuit meets an ownership challenge
World Liberty Financial countersued Sun for defamation in Florida state court on May 4, 2026. It accuses him of coordinating a campaign to damage its reputation and token price, and alleges improper conduct involving token transfers. Sun rejects those accusations.
Tensions escalated after Sun declined further capital calls. The relationship also deteriorated over a proposed governance change extending restrictions on early investors’ holdings.
Backed by the Trump family, the project reportedly maintains ownership links to the UAE, including a 49% stake allegedly controlled by entities tied to Sheikh Tahnoon bin Zayed Al Nahyan. Sun’s sanctions request concerns what the company disclosed about its ownership and citizenship during the litigation.
According to Sun, World Liberty Financial initially listed Florida as its sole citizenship. In its revised disclosure, the company named 22 entities within its ownership structure and cited Florida, Delaware, Puerto Rico and the UAE among the citizenship jurisdictions involved.
Federal jurisdiction and arbitration complicate the case
The ownership amendment raised a challenge to the federal court’s authority to hear Justin Sun’s lawsuit over $WLFI. Sun brought his case before the US District Court for the Northern District of California, relying on diversity jurisdiction, a legal mechanism permitting certain cross-jurisdictional disputes to be heard in federal court.
World Liberty Financial subsequently argued that the court lacked jurisdiction because foreign parties were involved on both sides. Sun, a foreign plaintiff, argues the company should have disclosed its foreign ownership when the litigation began.
The amendment followed an August 20, 2026 hearing at which the court allowed some claims to remain in federal court while directing others to arbitration. Both parties were directed by the judge to determine which claims fit within each proceeding and to present a joint proposal.
World Liberty Financial filed its supplemental citizenship disclosure on August 26, 2026. A September 29, 2026 order then stayed proceedings until October 22, 2026 for jurisdictional discovery.
According to Sun, his legal team devoted months of work and hundreds of thousands of dollars to fighting arbitration prior to the jurisdiction being challenged. He wants World Liberty Financial and its lawyers to bear costs associated with the allegedly misleading disclosures.
Token-holder rights remain central to Sun’s claims
The investor-rights questions concern transfer restrictions, governance participation and disclosure of administrative powers. Sun’s allegations challenge both his inability to move tokens and the contractual basis for those restrictions; World Liberty Financial maintains its freezing powers were disclosed.
Sun stated that, after the federal court rules on the sanctions motion, he plans to bring his original claims again in a California state court.
Article produced with the assistance of artificial intelligence and reviewed by the editorial team.
