A California federal judge has ruled that Justin Sun's lawsuit against World Liberty Financial will stay in open court rather than being pushed into private arbitration, handing the TRON founder a procedural win in a dispute that centers on whether WLFI built hidden controls into its token contracts. U.S. District Judge James Donato ruled Sun's individual claims will remain public, rejecting World Liberty's attempt to move the case behind closed doors.
Sun filed the lawsuit, Sun et al. v. World Liberty Financial LLC, in April 2026 in the Northern District of California. He says he invested $45 million in WLFI tokens as an early backer — support he says helped push the project's token sale past $550 million — and that World Liberty later used undisclosed contract controls against him after their relationship deteriorated.
The 'Backdoor' Allegation
At the center of Sun's case is a claim that World Liberty embedded a hidden blacklisting function into both the WLFI token contract and the USD1 stablecoin — controls he says let the team freeze, restrict, or burn any holder's tokens without notice. In his own account of the dispute, Sun said the original WLFI contract deployed in September 2024 carried no blacklist or seizure function at all, and that the capability was only added in a version 2 upgrade on August 24, 2025 — eleven months after his investment and just a week before trading opened. Sun has called on World Liberty to publicly disclose who controls the guardian account and multisig that govern the contract, arguing that every investor has a right to know who holds the power to freeze their holdings.
World Liberty disputes the framing. The project says its token sale documents authorized restrictions under certain circumstances, and it has filed a counterclaim against Sun in Florida accusing him of running a defamation campaign and making improper transfers. The dispute has played out largely in public, with both sides trading accusations on social media even as the underlying legal fight moves through the courts.
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Why the Arbitration Ruling Matters
Keeping the case in open court rather than arbitration is significant beyond this one dispute. Arbitration proceedings are typically confidential, meaning any findings about how WLFI's contract controls actually work — and who holds the keys to use them — would likely never become public. With the case proceeding in federal court instead, the discovery process could surface details about the guardian and multisig structure that WLFI has so far declined to disclose voluntarily.
The fight also carries political weight given WLFI's ties to the Trump family and Sun's own public support for the administration's pro-crypto agenda — a dynamic that has made this dispute unusually visible even by crypto litigation standards. With Sun's claims now set to proceed in open court, the case is likely to keep surfacing new details about how much control WLFI actually retained over tokens it sold to outside investors.
