Judge Keeps Sun's World Liberty Claims In Court

A federal judge in San Francisco on Thursday kept TRON founder Justin Sun's individual claims against World Liberty Financial in a public courtroom, declining the Trump family crypto venture's request to route the whole dispute into private arbitration.

The forum decides how much of the dispute becomes visible. Proceedings under the American Arbitration Association rules the contracts invoke are confidential, while a district court docket is public. The case turns on the blacklist function World Liberty added to the WLFI contract in August 2025 and used days later to freeze the 600 million tokens Sun had been cleared to trade.

Sun described the outcome in a post on X written in Chinese. "The judge ruled that all of my individual claims will remain in open court," he wrote, in translation. The judge also rejected World Liberty's position that every claim brought by his two corporate plaintiffs belonged in arbitration, Sun said, and directed the parties to work out which claims stay and which go.

The docket in Sun v. World Liberty Financial LLC shows Judge James Donato set argument on the arbitration motion for 11 a.m. Thursday in Courtroom 11 of the Northern District of California, and that two transcript orders were filed the same day. No written order resolving the motion had been entered as of the docket's last update, leaving Sun's account as the only public description of what the judge said.

World Liberty never asked the court to arbitrate Sun's personal claims. Its June 2 motion, filed by Quinn Emanuel Urquhart & Sullivan partners James Judah and William Burck, asked the court to "compel Blue Anthem Limited and Black Anthem Limited to arbitrate their claims, and stay any claims brought by Yuchen (Justin) Sun if those claims are not dismissed."

Blue Anthem and Black Anthem are the British Virgin Islands entities Sun owns. Blue Anthem signed four successive agreements carrying arbitration clauses, according to the motion --- a November 2024 advisor token agreement, January 2025 terms of sale, a September 2025 token unlock agreement, and a fourth filed under seal. Black Anthem is party to the sealed one. World Liberty argued the claims need only "touch matters" those contracts cover.

The company's position on venue was already on the record. In a stipulation entered May 25, World Liberty stated that the dispute with the two entities "should proceed in arbitration and cannot proceed in the United States District Court for the Northern District of California, or any other public court," and that Sun personally is not a party to the underlying agreements.

Sun's lawyers at Cahill Gordon & Reindel and Keker, Van Nest & Peters countered that the November 2024 token purchase agreement, which governed his first $30 million of tokens, carries an exclusive forum clause sending any proceeding "arising out of or based upon" it to federal or California state court. "[N]one of the claims would exist if there were no TPA," their July 14 opposition argued. They also said World Liberty waived arbitration by suing Sun for defamation in Florida state court.

Sun paid $45 million for 3 billion WLFI tokens --- $30 million in November 2024 and $15 million in January 2025 --- and received another 1 billion as advisor compensation, according to his complaint. The Defiant covered the $30 million anchor investment when it closed.

The complaint alleges World Liberty amended the WLFI contract on Aug. 24, 2025 to let a designated owner address blacklist any wallet and freeze its tokens, with no governance vote and no disclosure. World Liberty unlocked 20% of early purchasers' holdings on Sept. 1, 2025, releasing 600 million of Sun's tokens for trading. It blacklisted the wallet holding them days later, and they are still frozen.

World Liberty said at the time that 272 wallets had been blacklisted over several days, 79% of them tied to a phishing attack and one "suspected of misappropriation of other holders' funds." That line is the basis of Sun's defamation allegation. He sued in April on seven counts, six of them under Delaware law: breach of contract, anticipatory breach, fraud in the inducement, conversion, unjust enrichment, breach of the implied covenant of good faith and fair dealing, and declaratory relief.

The May 25 stipulation bars World Liberty from burning, destroying or reallocating any of Sun's tokens, and by its own terms lapses on "a decision in favor of World Liberty on any dispositive motion or any motion to compel arbitration," at which point the company agreed to negotiate a replacement in good faith. A partial win on arbitration puts that clause in play.

Most of Thursday's post went past the ruling to USD1. Sun wrote that World Liberty has built the same freeze capability into the stablecoin, and that he has seen no evidence the company could satisfy a judgment in the hundreds of millions of dollars. The USD1 claim does not appear in his complaint, and World Liberty's USD1 page does not address freezing. Tether's USDT and Circle's USDC both carry freeze functions their issuers use to act on law enforcement requests.

The solvency argument rests on the Dolomite arrangement The Defiant reported in April, when World Liberty deposited roughly 5 billion WLFI as collateral on the lending market and borrowed $75.7 million in stablecoins, $65.4 million of it in its own USD1. The complaint alleges Dolomite was co-founded by Corey Caplan, whom it identifies as World Liberty's advisor and chief technology officer. Caplan filed a declaration supporting the arbitration motion. Dolomite currently shows $310.7 million borrowed across chains, $296.6 million of it on Ethereum, according to DefiLlama.

USD1 supply is about $4 billion, down roughly 5% from $4.24 billion a month ago, according to DefiLlama. Ethereum holds $1.51 billion, BNB Chain $1.40 billion and Solana $1.06 billion.

The stablecoin's issuance is also moving. The Office of the Comptroller of the Currency on Aug. 14 granted preliminary conditional approval to organize World Liberty Trust Company, National Association, in Bay Harbor Islands, Fla., which would take over USD1 issuance and custody from BitGo Bank & Trust. The OCC decision states that World Liberty Financial "is not a party to this application" and that WLFI investors "would not have an investment in, or control over, the Bank," which would sit under WLTC Holdings LLC and share indirect common owners with the token issuer.

World Liberty sued Sun for defamation in Miami-Dade County circuit court on May 4, alleging he made false statements to nearly four million X followers about prohibited transfers and about the company's authority to freeze tokens. "Rather than acting in good faith, Justin Sun chose to defame World Liberty --- repeatedly, publicly, and to millions of followers," said Tom Clare, counsel to the company, in a statement announcing the suit. Sun said he stood by his actions. His lawyers now cite that filing as evidence the company waived arbitration.

WLFI traded at $0.0616 late Thursday, up 2.9% over 24 hours, for a market value of $1.96 billion, according to CoinGecko. The token is 81% below the $0.3313 it reached on Sept. 1, 2025, its first day of trading, and 21% above the record low of $0.0508 set on Aug. 9.

Briefing on World Liberty's separate motion to dismiss the complaint has been stayed since June 5. The court also vacated the case management conference on July 23, so no discovery schedule is set.

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