The crypto initiative World Liberty Financial (WLFI), linked to Donald Trump’s family, has raised significant worries about its authority to freeze and reallocate user funds, even as it asserts to be ‘community governed’.

On Wednesday, WLFI announced it would reassign assets impacted by a phishing incident that jeopardized the security phrases of a “relatively small subset” of its users’ wallets. They claimed these compromised accounts fell victim to “third-party security lapses,” rather than flaws within the platform itself.

“This was not a WLFI platform or smart contract issue. Attackers gained access to user wallets through third-party security lapses,” WLFI stated on X.

The asset reallocation applies solely to users who have undergone Know Your Customer (KYC) verification, leaving accounts of those who have not completed KYC procedures indefinitely frozen. WLFI initially suspended the affected wallets in September during their investigation into the attack.

WLFI Phishing Incident Source: Worldlibertyfi

WLFI has blacklisted 272 wallets, with 215 being linked to the phishing incident, while 50 of these wallets reported actual compromise.

“We stepped in preemptively to stop hackers from draining funds and are working with the rightful owners to secure/move assets,” WLFI mentioned in a September 6 X post.

Cointelegraph has reached out to WLFI for information regarding the total value of the affected assets.

Users Divided Over WLFI’s Authority on Funds

The announcement from WLFI has sparked mixed reactions among users, many expressing outrage over the platform’s power to freeze and reallocate funds without necessitating a decentralized governance proposal.

“I think it’s hilarious how everyone is cheering that you can rug or lock any wallet on your own protocol. The entire ecosystem is dependent on your security. Everyone will get phucked in the end,” outlined a pseudonymous blockchain developer named flick, in response to WLFI’s announcement.

Conversely, some users viewed WLFI’s actions as a demonstration of accountability, suggesting that the project is aiming to make amends with users affected by the phishing incident.

“Good to see a project actually taking responsibility instead of hiding behind ‘not our fault’. User safety > everything,” shared crypto trader DefiBagira in a Wednesday X response.

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