Onchain evidence suggests World Liberty Financial’s (WLFI) steep price decline was fueled by broad shorting and heavy selling across exchanges — not by Justin Sun’s token transfers — even as the project defends its decision to freeze wallets, including Sun’s, as a move against phishing-related compromises.

WLFI confirmed last week that it blacklisted 272 wallets, citing security concerns. Of these, roughly 215 were tied to a phishing attack, while another 150 were compromised through support channels. The project stressed that the action was not aimed at traders.

“WLFI only intervenes to protect users, never to silence normal activity,” the team said in a post on X.

Sun’s Wallet Freeze Sparks Confusion

Tron founder Justin Sun saw his WLFI address frozen on Friday after conducting small “dispersion test” transfers between his wallets. These movements came shortly after he claimed unlocked tokens at launch, but none involved sales.

The transfers led some observers to suspect Sun was offloading tokens. However, onchain data paints a different story.

According to Nansen founder Alex Svanevik, Sun’s largest WLFI transfer — 50 million tokens worth around $9.2 million — occurred on Sept. 4 at 09:18 UTC, several hours after WLFI had already suffered its sharpest drop. “The timeline shows the transfer followed the crash rather than triggered it,” Svanevik noted.

Market Makers in Focus

Nansen data also flagged a $12 million WLFI transfer from HTX to Binance by a third-party market maker. The tokens were borrowed from HTX’s capital for a routine rebalance. Given WLFI’s daily trading volume of more than $700 million, the transfer was too small — and too late — to account for the crash.

Instead, market participants are pointing to widespread shorting and sell pressure across trading desks and market makers. One key datapoint: a transfer from BitGo to Flowdesk that coincided with the onset of WLFI’s price slide, reinforcing the view that systemic dumping, not insider activity, drove the decline.

Whales on Edge

Still, WLFI’s decision to freeze wallets has rattled the market. Several whales and desks expressed concern that their holdings could be locked at the project’s discretion.

“If they can do it to Sun, who’s next?” one person familiar with trader discussions told CoinDesk.

Market Outlook

At press time, WLFI is trading at $0.18, down 40% from its listing price, according to CoinGecko.