Justin Sun has escalated his dispute with Donald Trump-backed World Liberty Financial, alleging that the USD1 stablecoin contains administrative functions allowing privileged operators to move funds from frozen wallets without holder consent. The Tron founder made the claims on Aug. 21, arguing that World Liberty’s published source code does not match the contract currently running on-chain.
According to Sun, the deployed USD1 contract includes drain and reallocate functions that operate on frozen addresses. A technical review confirmed that drain transfers a frozen address’s full balance to the contract owner, while reallocate can move a specified amount from a frozen address to another address. Neither action requires approval from the affected holder. Sun stated: ‘USD1's highest-level permissions allow the issuer to move USD1 out of YOUR account into its own wallet — or anyone else's — without your consent. Cold wallet? Multisig? Doesn't matter. The authority operates at the token contract level. Nothing you do can stop it.’
The live USD1 implementation operates through an upgradeable proxy that moved to its current StablecoinV2 implementation on April 5. World Liberty’s GitHub repository lists minting, burning, freezing, and pausing functions, but does not show the drain, reallocate, or V2 initializer functions present in the live contract. While centralized stablecoins such as USDT and USDC routinely retain freeze or blacklist powers, and BitGo — USD1’s current issuer and technical provider — discloses that it may freeze or upgrade USD1, the mismatch between the public repository and the deployed contract remains a disclosure gap.
The allegations deepen a months-long conflict. Sun was an early investor in WLFI, committing $45 million. The relationship later deteriorated after World Liberty restricted his token access, accused him of improper asset movements and price pressure, and sued him for defamation; Sun denies the claims. On Aug. 20, Sun said he won a procedural victory keeping his personal claims in federal court. World Liberty CEO Zach Witkoff called Sun’s account of the arbitration hearing ‘riddled with falsehoods.’
The dispute comes seven days after the Office of the Comptroller of the Currency granted preliminary conditional approval to World Liberty Trust Company, a proposed national trust bank that would assume USD1 issuance, redemption, and reserve management from BitGo. USD1’s circulating supply has fallen by more than $1.3 billion from a February peak above $5.3 billion to $4 billion, according to DeFiLlama, though the decline began before the latest allegations. The available evidence does not establish that USD1 is a rug pull, that reserves are impaired, or that funds have been moved without authorization, but the disclosure gap is harder to dismiss.
