Deep Dive into Trump Team's Decentralized Lending Project WLF: Token Distribution and Fundraising Approach
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Deep Dive into Trump Team's Decentralized Lending Project WLF: Token Distribution and Fundraising Approach
After surviving a second assassination attempt, Trump launched the long-rumored cryptocurrency project World Liberty Financial (WLF).
Navigating Web3 tides with focused insightsAfter surviving a second assassination attempt, Trump launched the long-rumored cryptocurrency project WorldLibertyFinancial (WLF). Although full details of the project remain unclear, key information has emerged through live interviews with Decrypt and RugRadio. As the latest venture by Trump's team into the crypto space, WLF aims to leverage blockchain technology to provide users with decentralized lending services. At the heart of the project is the governance token WLFI, which operates on the Ethereum blockchain and is managed and operated in a decentralized manner. The project claims that the WLFI token will be more "user-friendly," lowering the technical barriers for ordinary users to enter the decentralized finance (DeFi) space through simplified design.
1. Project Overview
1.1 Fundraising Method: Regulation D Rule 506(c)
According to Aiying艾盈, the WLF project employs a special fundraising approach—raising capital via the U.S. Securities and Exchange Commission’s (SEC) Regulation D Rule 506(c). This regulation allows projects to publicly offer tokens to accredited investors without undergoing a full securities registration process. For large-scale initiatives like WLF, Rule 506(c) offers a more flexible fundraising pathway. Especially amid tightening cryptocurrency regulations, this rule enables the project to legally advertise and target specific investor groups while avoiding the cumbersome and costly procedures associated with traditional financing.
1.2 WLFI Token Allocation Plan
Based on excerpts from the project’s whitepaper, 62.66% of the token supply will be distributed through an upcoming token sale. A portion of the net proceeds from the sale will go into a multi-signature wallet reserve fund, while another portion will be allocated to the project’s founders, team, and service providers. An additional 17.33% of tokens are designated to incentivize community governance participation and other community growth initiatives. The remaining 20% is allocated to the team, advisors, and future employees, including distributions to affiliates of the Trump Organization, the WLF Foundation, and the Witkoff Group led by Trump’s longtime friend Steve Witkoff.
2. Aiying艾盈 Analysis: Understanding SEC Regulation D Rule 506(c)
Regulation D Rule 506(c) is a significant exemption provided by the U.S. Securities and Exchange Commission (SEC), allowing companies to conduct public fundraising toward accredited investors without full securities registration. This provision offers many startups and cryptocurrency projects a legal avenue for fundraising, bypassing the complex and expensive processes typical of traditional securities registration.
2.1 Public Fundraising Under 506(c)
Compared to other fundraising exemptions—such as Regulation D’s 506(b) rule—a key feature of 506(c) is its allowance for general solicitation and public fundraising. This means projects can promote their tokens or securities through advertising, social media, and public campaigns to reach potential investors. This is particularly attractive for projects needing to raise substantial funds quickly. While traditional securities laws typically prohibit unregistered securities from being publicly advertised, 506(c) removes this restriction—but imposes stricter requirements on investor qualification verification.
2.2 Accredited Investor Requirements
Although 506(c) permits public fundraising, the SEC enforces strict eligibility criteria for investors. According to SEC definitions, an accredited investor is an individual or entity with sufficient financial sophistication, meeting at least one of the following conditions:
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Individual Investors: Annual income exceeding $200,000 in each of the past two years, or joint income with a spouse exceeding $300,000, with expectation of maintaining the same income level in the current year; or individual net worth exceeding $1 million (excluding primary residence).
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Institutional Investors: Includes financial institutions, trusts, and other legal entities whose asset size meets SEC thresholds.
The project must implement rigorous verification procedures to ensure all investors meet these accredited standards. Common methods include reviewing tax returns, bank statements, or professional credentials. While this increases compliance costs for the project, it effectively enhances market security and reduces fraud risks.
2.3 Applicability to Cryptocurrency Projects
For cryptocurrency projects, 506(c) provides a lawful and compliant fundraising channel—especially valuable given the complex legal challenges often faced within existing regulatory frameworks. As the SEC intensifies oversight of the crypto sector, an increasing number of projects are turning to 506(c) for fundraising. Examples include:
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PerpetualIndustries: An energy technology company focused on blockchain and cryptocurrency mining. It conducted a Series A preferred stock raise under 506(c), using funds to expand its crypto mining operations, including purchasing mining equipment and scaling data infrastructure (MoschettiLaw) (Perpetual News).
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Telegram's TON (Telegram Open Network): Although ultimately blocked by the SEC, Telegram initially raised funds under Rule 506(c), marketing its blockchain project to accredited investors. This case illustrates the potential application of Rule 506(c) in the crypto space, despite the project later being halted due to non-compliance with securities laws.
While the whitepaper emphasizes that WLFI tokens are not considered securities, they will be sold under SEC Regulation D Rule 506(c)—meaning they are treated as unregistered securities offered only to qualified investors. In effect, this acknowledges that the tokens may be classified as securities, and selling them through this framework helps avoid violations of securities laws. Consequently, all WLFI purchasers will undergo identity verification under Know-Your-Customer (KYC) standards comparable to those used by U.S.-based cryptocurrency exchanges such as Coinbase and Kraken.
3. How Can ICO Projects Achieve Compliance and Avoid SEC Scrutiny?
For Web3 organizations operating in the U.S. or serving U.S. users, how can they avoid potential SEC challenges or lawsuits? Aiying艾盈 summarizes the following points for reference:
3.1 Clearly Define Token Utility and Functionality
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Utility First: Ensure the token’s function within the project is clearly defined—for example, paying transaction fees, accessing platform services, or participating in community governance. The primary use of the token should be closely tied to the actual operation of the platform, rather than serving mainly as an investment vehicle.
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Minimize Speculative Nature: Avoid overemphasizing the token’s price appreciation or investment returns in marketing materials. Instead, focus on its real-world applications within the ecosystem. Clearly communicate the token’s use cases and practical functions to reduce the risk of the SEC classifying it as a “security.”
3.2 Transparent Issuance and Management Processes
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Avoid ICO Pitfalls: If conducting a token sale—especially an ICO—ensure the process complies with legal requirements. Consider private placements (e.g., selling only to accredited investors) or registered offerings to maintain compliance.
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Transparent Governance: Clearly disclose how project funds will be used, ensuring transparent and consistent management aligned with initial promises. Provide regular financial updates and project progress reports to avoid attracting SEC scrutiny due to opaque fund usage.
3.3 Comply with Existing Laws and Regulations
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Registration or Exemption: When operating in the U.S., ensure your project meets SEC requirements for securities issuance. If the token could be deemed a security, consider either registering the offering or applying for a legal exemption.
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AML and KYC Compliance: Adhere to anti-money laundering (AML) and Know-Your-Customer (KYC) regulations. Ensure users undergo strict identity verification during registration and transactions to prevent illicit activities.
3.4 Work with Legal and Compliance Experts
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Hire Legal Counsel: Throughout project development and token issuance, collaborate with experienced cryptocurrency legal advisors. They can help assess legal risks and ensure compliance at every stage.
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Dedicated Compliance Team: Establish or hire a specialized compliance team to monitor global regulatory changes and promptly adjust the project to meet new requirements.
3.5 Clear Marketing and Communication Strategy
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Cautious Promotion: In marketing efforts, avoid language that could lead regulators to view the token as an investment contract. Do not promise high returns or emphasize speculative value; instead, highlight technological innovation, community benefits, and tangible token utilities.
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Educate Users: Publish educational content to help users understand the token’s functionality and use cases, reducing legal risks arising from misunderstandings or unrealistic expectations.
3.6 Prudent Governance and Operational Model
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Decentralized Governance: If claiming decentralization, ensure the governance structure is genuinely decentralized, enabling user participation in decision-making and minimizing centralized control by developers or issuers. This reduces the likelihood of the SEC defining the project as a centrally controlled “security.”
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Community-Driven Development: Build strong community support and empower users through voting mechanisms, reducing reliance on core team members and reinforcing true decentralization.
3.7 Legally Compliant Secondary Market Operations
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Mitigate Market Manipulation Risks: In secondary market activities, avoid price manipulation and ensure all trading is fair and transparent. Regularly monitor trading behavior to prevent actions that might attract SEC attention.
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Compliant Listings: Before listing tokens on exchanges, verify that the platforms comply with local laws—especially important when listing in the U.S., where exchanges must meet SEC regulatory standards.
3.8 Prepare for Future Legal Challenges
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Emergency Preparedness: Develop contingency plans in advance for potential legal challenges, including selecting legal defense teams and crafting communication strategies with regulators. Be ready to respond swiftly if subject to regulatory investigation.
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Engage with Regulators: If the regulatory landscape shifts, proactively cooperate with authorities, demonstrating willingness to adapt the project to new rules. This collaborative approach can reduce conflict and potentially lead to settlements.
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