WLFI borrows $50M from its own platform, users may face withdrawal freeze

Concerns are growing in the DeFi market after World Liberty Financial (WLFI) borrowed over $50 million in USD1 from Dolomite, a lending platform within its own ecosystem, BeInCrypto reported. The move has raised alarms about potential withdrawal freezes for users. The WLFI Treasury wallet took out a loan of 50.44 million USD1, collateralized by approximately 3 billion WLFI tokens. This action pushed the lending pool's utilization rate above 100%, turning the platform's liquidity negative and effectively depleting its funds. As a result, Dolomite users who deposited USD1 to earn a 35% yield may be unable to withdraw their assets until the large borrowing position is resolved. The current lending rate on the platform is 30%, with all funds having been borrowed by World Liberty Financial. Some observers have pointed out that if the price of the WLFI token were to fall sharply, the over-collateralized position could face liquidation, spreading risk throughout the entire liquidity pool.