Sun keeps World Liberty dispute out of arbitration, alleges USD1 has hidden freeze controls
DeFi & Yields ·
A California federal judge sided with Justin Sun in refusing to send his claims against World Liberty Financial into confidential arbitration, keeping the case in open court.
Sun told followers on X that his legal team blocked the platform's bid to move the dispute out of public view and to seal related court filings, and that the presiding judge determined his personal claims will proceed openly rather than behind closed arbitration doors, a result cryptopotato.com confirmed in its own coverage of the ruling.
Beyond the procedural win, Sun leveled a more serious technical accusation: he says World Liberty built undisclosed "backdoor functions" into its USD1 stablecoin that would let the project freeze or destroy tokens held by users, a capability he argues was never disclosed to holders.
Sun also cast doubt on whether World Liberty and USD1 are adequately capitalized. He noted that the roughly $4 billion in collateral reportedly backing USD1's market value belongs to the coin's users, not to World Liberty itself, meaning it cannot legally be tapped to satisfy the hundreds of millions of dollars he is seeking in claims, according to the account relayed via wublockchain.xyz.
He said he has not seen proof that World Liberty holds enough capital outside of that user collateral to cover a possible judgment against it or other outstanding obligations, and he told investors to proceed with what he called "extreme caution." World Liberty has issued no public response to these latest claims.
The dispute now heads deeper into open litigation rather than private arbitration, meaning future filings and evidence about USD1's backing and any freeze mechanisms could become part of the public record. Unresolved for now are the underlying merits of Sun's backdoor and solvency allegations, the size and composition of World Liberty's non-collateral capital, and whether the project will respond to the accusations before further court proceedings.