Key facts
- A California federal judge denied World Liberty Financial's (WLFI) request to move Justin Sun's lawsuit into private arbitration.
- Sun's individual claims against WLFI will now proceed in open court.
- The lawsuit centers on Sun's allegations that WLFI embedded hidden controls in its smart contract.
- Sun claims these controls allowed WLFI to freeze or burn token holdings, which were allegedly used against him.
- Sun invested $45 million in WLFI and received tokens as an early backer and advisor.
- WLFI has denied wrongdoing and filed a counterclaim accusing Sun of defamation.
TRON founder Justin Sun has secured a significant procedural victory in his lawsuit against World Liberty Financial (WLFI), as a California federal judge rejected WLFI's attempt to force the case into private arbitration. The ruling means Sun's individual claims will be heard in open court, bringing public scrutiny to allegations that WLFI secretly embedded backdoor controls in its smart contract.
Judge James Donato of the U.S. District Court for the Northern District of California denied WLFI's request to move all of Sun's claims into confidential arbitration and seal the case. While the court ordered the parties to negotiate which company-related claims might proceed privately, Sun's personal allegations will remain public. Sun hailed the decision as a win for transparency, emphasizing that his claims would be heard in a public courtroom.
The lawsuit, filed in April 2026, centers on Sun's assertion that WLFI's smart contract contained hidden functions allowing the team to freeze, restrict, or burn token holdings without notice. Sun, who invested $45 million in WLFI and received tokens as an advisor, claims these powers were used against him after their relationship deteriorated. His total holdings reportedly reached approximately 4 billion tokens, with peak valuations estimated between $300 million and $1 billion.
Sun also raised concerns about WLFI's USD1 stablecoin, which he alleges carries similar freeze and burn controls, and questioned the company's capital reserves. Reports suggest WLFI posted around five billion tokens as collateral on Dolomite, a lending platform co-founded by WLFI's CTO, a detail Sun's legal team intends to investigate. Despite the ongoing litigation, WLFI has continued its business expansion, including a new AI partnership with WorldClaw.
World Liberty Financial has denied all allegations, with co-founder Zach Witkoff previously stating Sun's claims were "entirely meritless." WLFI has also filed a counterclaim in Florida, accusing Sun of defamation and improper transfers. The recent ruling does not address the merits of the case but ensures that evidence and arguments will be accessible to investors, regulators, and the public, raising broader questions about decentralization claims in the crypto industry.