Trump’s World Liberty Begins Token Reallocation After $22.1M Security Breach Burn

World Liberty has started moving user funds after a major token burn. This comes after the security breach that exposed vulnerabilities on its systems. Also, the platform is facing claims of illegal token sales to North Korea and Russia.

World Liberty Responds After Security Breach

In a recent X thread, WLFI confirmed that a group of user wallets were compromised before the launch due to phishing incidents and exposed seed phrases. It shared that the breach was due to third-party security lapses.

WLFI promptly froze the compromised wallets back in September to protect affected holders. They then began a process to verify owners through KYC checks. Also, developers created new systems designed to move user balances into secure wallets without increasing risk.

The firm confirmed that it will soon start recovering funds from everyone who completed verification. However, the wallets of unverified ones will still be locked until they use the support channels.

This move comes after an emergency action reported earlier by Arkham analyst Emmett Gallic. In this incident, World Liberty executed a burn of 166.667 million WLFI tokens from the address. The value of the burn was more than $22 million. The tokens were then reassigned to a recovery wallet.

According to Gallic, the emergency function used in the burn was built for two situations. This is for when investors lose wallet access before vesting, and when a malicious actor gains WLFI through an exploit. This was the second major intervention on suspicious wallet activity in recent months.

Notably, the wallet of Tron founder Justin Sun was among those blacklisted at the time of the hack. He fought against the freeze then as well.

WLF Accused Of Illegal Token Sales By U.S Senators

CNBC reported that senators are reviewing the company because of its close relationship with the Trump family. Senators Elizabeth Warren and Jack Reed have called on the DOJ and the Treasury Department to check the company’s operations over token sales to individuals in North Korea and Russia.

Their complaints stem from a report by Accountable.US. They said the company sold WLFI tokens to suspicious entities during the early distribution phase. World Liberty has denied the claims.

A spokesperson said every presale participant was subject to high-level checks.

“World Liberty Financial performed the most rigorous AML/KYC checks in the industry on each pre-sale buyer of WLFI governance token, and rejected millions of dollars from would-be purchasers that did not pass the tests,” they said.

This is also in some way consistent with another criticism leveled at Binance after the Trump administration had pardoned Changpeng Zhao. Some lawmakers charged that the exchange had been backing Trump-connected projects like WLFI and its stablecoin USD1. Those claims were dismissed too.