Justin Sun has intensified his fight with World Liberty Financial over frozen WLFI tokens, asking a federal court in California to sanction the Trump family-linked cryptocurrency project over what he describes as a late attempt to add foreign entities and challenge the court's authority to hear the case.
In a recent filing in the U.S. District Court for the Northern District of California, lawyers for the TRON founder argued that WLFI initially litigated through a Florida entity before later introducing companies connected to Florida, Delaware, Puerto Rico and the United Arab Emirates. Sun's legal team says the additions were designed to complicate the question of diversity jurisdiction, a rule that can allow federal courts to hear disputes between parties from different U.S. states or countries.
The court has not yet ruled on the jurisdiction challenge. A hearing is scheduled for Dec. 10, and the sanctions request runs alongside Sun's wider claims that he was induced to buy WLFI tokens and later had access to a substantial portion of his holdings blocked.
Sun is seeking about $264,000 in legal fees through the sanctions motion. Such motions generally argue that a party or its lawyers engaged in improper litigation conduct, and can result in fee shifting or other court-imposed penalties if a judge finds the request justified.
Sun says 595 million unlocked tokens were frozen
Sun has said he committed $45 million to WLFI and acquired roughly 3 billion tokens, in addition to about 1 billion tokens allocated to him as an adviser. According to his lawsuit, WLFI blacklisted wallets associated with him in September 2025, preventing transfers involving about 595 million unlocked WLFI tokens.
Sun valued those frozen tokens at roughly $107 million when the blacklist was imposed. That figure depended on WLFI's market price at the time and does not establish what the tokens could have been sold for in the market, particularly given the liquidity constraints that can affect newly issued or closely held tokens.
The dispute places one of the crypto sector's most visible founders against a project associated with the family of U.S. President Donald Trump. WLFI has promoted a decentralized-finance ecosystem built around its token and stablecoin-related activity, while Sun has become one of the project's largest disclosed token holders.
Sun filed the lawsuit in April 2026. His complaint centers on allegations of fraudulent inducement and unlawful token freezes, arguing that WLFI changed the practical conditions of his participation after accepting his capital. WLFI's response to those allegations will be tested through the jurisdiction dispute and the underlying proceedings, rather than resolved by the sanctions request alone.
The case also illustrates the power that token blacklists can give project operators. A blacklist function can restrict a wallet's ability to transfer or use tokens, often through smart-contract controls. Such features can be used for compliance or security purposes, but they can also become a central legal issue when a major holder says restrictions were imposed without a valid contractual basis.
Treasury activity adds pressure to the dispute
The court fight has unfolded as WLFI's treasury transactions have drawn attention from traders and DeFi users. In April 2026, WLFI pledged about 5 billion tokens to the lending protocol Dolomite and borrowed roughly $75 million in stablecoins, according to the account of the transactions included in the supplied material.
The move was described as reducing available liquidity on Dolomite and leaving some depositors unable to withdraw funds. Lending protocols rely on deposit pools to satisfy withdrawals, meaning a large borrower can create stress when a substantial share of available assets is drawn down or pledged against concentrated collateral.
WLFI later sent $40 million of the borrowed funds to Coinbase Prime, the institutional custody and execution platform. A transfer to such a platform does not by itself establish a sale or an intention to sell, but it can attract market scrutiny because prime brokerage venues are commonly used to hold, trade or settle large digital-asset positions.
WLFI was quoted near $0.048 to $0.049 in the material supplied, down more than 90% from its historical peak. The token's reported daily trading volume was about $47 million. Sharp declines and uneven liquidity can make disputes involving token freezes more consequential for holders, since access restrictions may prevent them from responding to price moves or managing collateral positions.
Congressional scrutiny could widen the record around WLFI
The legal case is developing alongside a potentially more aggressive phase of congressional oversight of Trump family crypto businesses. Democrats regained majorities in both chambers of Congress, according to the supplied account, giving committee leaders greater power to issue subpoenas and compel records rather than rely on voluntary information requests.
Representative Robert Garcia, who is expected to become chair of the House Oversight Committee in January, has said he intends to examine Trump family crypto activity. Garcia has cited more than $1 billion in revenue connected to the family's crypto ventures.
Earlier this year, Representative Ro Khanna raised questions about an agreement involving a UAE-linked party and Eric Trump that was valued at $500 million, including an upfront payment of about $250 million. The supplied account said approximately $187 million was alleged to have gone to Trump family entities.
Those political inquiries are separate from Sun's civil claims, and congressional scrutiny would not determine whether WLFI lawfully froze his tokens. They could nevertheless increase pressure on the project to explain its ownership structure, overseas relationships, treasury practices and controls over token transfers.
The Dec. 10 hearing will first address the procedural battlefield: whether Sun's case remains in the Northern District of California and whether his sanctions request has merit. A ruling on jurisdiction would shape where the core claims over the frozen WLFI tokens are litigated, while the underlying dispute over Sun's holdings remains unresolved.
For deeper context on WLFI’s turmoil and market impact, explore this detailed WLFI explainer next.
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