Justin Sun's personal claims against World Liberty Financial will stay in a California federal court after a judge rejected the crypto project's bid to move the entire dispute into private arbitration on August 20.
Judge James Donato of the U.S. District Court for the Northern District of California took arguments from both sides and sided with Sun on his individual claims. The decision denied World Liberty's effort to seal the case from public view.
"The judge ruled that all of my individual claims will remain in the public courtroom," Sun said on X shortly after the hearing.
Unlike private arbitration, federal court proceedings generate public records. Filings and arguments enter the court docket unless a judge specifically orders otherwise, which World Liberty had sought. Judge Donato also declined to send every company-related claim to arbitration and ordered both parties to meet and determine which claims tied to Sun-controlled companies should stay in federal court.
"World Liberty tried to push this case behind closed doors, and the Court said no," Sun wrote on X.
Today, my counsel appeared in California federal court to oppose World Liberty Financial's @worldlibertyfi efforts to force our dispute into secret arbitration proceedings and seal documents from public view.
— H.E. Justin Sun 👨🚀 🌞 (@justinsuntron) August 20, 2026
We argued forcefully that this case belongs in open court—and the…
A $45 million investment that curdled
The dispute traces to Sun's early role as one of World Liberty's largest backers. He committed $30 million in November 2024 for 2 billion WLFI tokens and added another $15 million in January 2025. He also held 1 billion tokens through an adviser role, which brought his total to roughly 4 billion tokens.
Sun said he believed in what World Liberty promised. The project's early token sale had struggled before his capital arrived, but his investment helped turn that sale into a $550 million raise.
His complaint, filed in April 2026 as Sun et al. v. World Liberty Financial LLC, No. 3:26-cv-03360-JD, alleges that after his money rescued the token sale, the relationship broke down in ways he describes as a deliberate betrayal.
What Sun alleges about the WLFI smart contract
Sun claims World Liberty secretly inserted controls into the WLFI smart contract that gave the project unilateral power to freeze or destroy any holder's tokens without notice. He alleges those controls were used against his own holdings after the relationship soured. When he tried to assert his legal rights, he says, the project threatened criminal referrals.
After he filed his lawsuit, Sun obtained a court order. The order prohibited World Liberty from permanently disposing of his tokens. He said that measure was necessary because the team had both threatened to destroy his tokens and held the technical power to follow through.
World Liberty denied wrongdoing. Co-founder Zach Witkoff previously called Sun's claims "entirely meritless." The project also filed a counterclaim in Florida, accusing Sun of improperly moving tokens and running what it characterized as a defamation campaign. Sun denies those allegations.
Sun raised related concerns about the project's USD1 stablecoin, alleging that World Liberty embedded the same freeze capabilities in that product. He wrote that "USD1 users should understand that World Liberty has given itself the technical ability to freeze or destroy their assets at any time."
WLFI has lost nearly 80% of its value since launch, according to CoinGecko.
Sun questions whether World Liberty can cover a judgment
Sun's lawsuit seeks hundreds of millions of dollars. He said he has seen no evidence that World Liberty holds sufficient capital to satisfy a judgment of that size.
He noted that USD1 carries a reported market capitalization of $4 billion but described that figure as user collateral backing the stablecoin, one that cannot be directed toward a court judgment.
He also raised a borrowing structure described in public reports. World Liberty reportedly deposited roughly five billion of its own WLFI tokens as collateral on Dolomite, a lending platform co-founded by World Liberty's own chief technology officer. The project reportedly borrowed at least $75 million in stablecoins through that arrangement, including its own USD1. Sun's complaint notes that industry analysts have drawn comparisons between that circular structure and the leverage that preceded the FTX collapse.
Sun also addressed World Liberty co-founder Chase Herro's background. Herro previously founded Dough Finance, another DeFi protocol. An investor later filed a lawsuit alleging that no hack occurred at that platform and that Herro personally moved user assets to his own wallet. According to public reporting, most of those funds remain missing. Sun's complaint states that many of the same people from Dough Finance are now at World Liberty.
Sun's earlier loss shaped how he sees this dispute
Before the World Liberty situation, Sun said ARIA defrauded him by taking approximately $500 million in collateral backing the TUSD stablecoin. He noted that while ARIA was insolvent and sitting on those funds, its agent Vincent Chok launched FDUSD through First Digital Trust. That stablecoin later de-pegged and had its trading pairs removed from Binance.
"That experience taught me to look more carefully at the projects I invest in, and it is one of the reasons I now have serious concerns about World Liberty," Sun wrote.
"Token holders deserve to see how projects treat the people who trust them," he added on X. "I believe that World Liberty would not be fighting this hard to hide their actions if those actions were defensible, and I will not rest until the community gets the transparency it deserves."
Sun said others have privately told him they believe World Liberty also harmed them but fear public retaliation if they file suit. He did not identify them.
"As alleged in my Complaint, World Liberty has shown that they will retaliate against those who challenge them," he wrote. "In my opinion, there is serious reason to be cautious about both $WLFI and USD1."
Gunel Ismayilova
Disclaimer: All materials on this site are for informational purposes only. None of the material should be interpreted as investment advice. Please note that, despite the nature of much of the material created and hosted on this website, HODL FM operates as a media and informational platform, not a provider of financial advisory services. The opinions of authors and other contributors are their own and should not be taken as financial advice. If you require advice, HODL FM strongly recommends contacting a qualified industry professional.
