Trump bet on World LibertyFi is full of red flags: report

Donald Trump and his sons are announcing the upcoming launch of a new crypto project that promises to “leave slow and outdated banks behind.”

Trump to launch World Liberty Financial

The project, which is expected to launch on Monday, September 16, will be another victory for Polymarket participants who predicted Trump would launch a cryptocurrency before the November elections.

Trump said in a post on X that he “embraces the future with crypto” and announced that he will speak at a “Twitter Spaces” event to commemorate the official launch of World LibertyFi at 8:00 p.m. ET.

Some crypto analysts are excited, with at least one observer expecting the World LibertyFi token to increase “10x” in value over the next two weeks (see below). But a Bloomberg report warns that World LibertyFi has some major red flags.

This Is For Trump, Insiders

First of all, entrepreneur Chase Herro, who has been involved in other crypto projects in the past, is at the helm of this project.

Herro’s last project was Dough Financial, a lending platform similar to AAVE (AAVE), JustLend, and Spark. According to DeFi Llama, Dough reached $3.2 million in assets before an exploit drained more than $2 million. Currently, only $10,863 in total value is locked and appears to be inactive.

The second red flag is that 70% of all of World Liberty Financial’s tokens are reserved for insiders, including Trump. While it’s common for most tokens in the crypto industry to go to insiders, 70% is a big number.

Crypto projects with large insider ownership are a big risk as their prices are vulnerable when they decide to sell their shares.

Additionally, the network could face regulatory hurdles with the Securities and Exchange Commission, which views these tokens as securities, arguing that token buyers need to have more information about the project and the people behind it.

There’s also the risk of competition in the lending industry, which has become quite saturated over the last few years. In addition to AAVE and JustLend, some of the most notable names in the industry include Morpho, LayerBank, and Fluid. Many of these have struggled to gain market share.

Meanwhile, most newly launched crypto projects are not doing well. Recently launched tokens like Notcoin (NOT), Pixelverse, and Wormhole (W) are down over 60% from their all-time highs.

Trump mixes politics and business

Critics also question the wisdom of Trump spending valuable campaign time promoting a money-making initiative just 50 days before Election Day.

Crypto is the latest product sold by the former, twice-impeached president. Other products include:

Signature sneakers are reportedly selling for $9,000 a pair. Trump-branded Bibles, essentially a copy of the King James Bible, are selling for $59.99 plus tax and shipping. They’re thought to have brought in $300,000 in total. He’s also reportedly made more than $12 million from a series of non-fungible tokens, or NFTs, featuring photoshopped images of the former president standing in front of various backdrops and wearing costumes (i.e. a sheriff’s hat and superhero cape). A photo book called “Our Journey Together” is selling for $100 on his website.

According to Arkham’s data, the value of the cryptocurrency portfolio is over $5.7 million.

It is not yet clear whether Trump promoted the event to fund his campaign or to pay off mounting legal debts. In August, Trump’s campaign raised $130 million, while Vice President Kamala Harris raised $361 million.

It’s also worth noting that Trump was fined $464 million in a civil lawsuit earlier this year.

As for his company, Trump Media & Technology, the stock has fallen nearly 80% from its high this year and is at its lowest point since the SPAC merger. Forbes estimates his net worth is now $3.9 billion, up from more than $7 billion earlier this year.