TRON founder Justin Sun has filed a motion for legal sanctions in California federal court against World Liberty Financial (WLFI), Donald Trump’s family crypto project. The step was taken after World Liberty submitted ownership disclosures revealing an entity based in the United Arab Emirates (UAE). Sun alleges the defense legal team deliberately delayed disclosing the information to eliminate federal diversity jurisdiction over his investment dispute.
Under U.S. federal civil procedure, federal courts lack jurisdiction to hear civil matters if the plaintiff is a foreign national and the defendant also includes a foreign entity within its ownership structure. Because Sun is a foreign citizen, the emergence of a UAE entity on World Liberty’s side automatically invalidates the basis for federal jurisdiction. However, it is the timing of the disclosure that Sun is contesting.
From Florida Domicile to 22 Entities
In initial court disclosures, World Liberty listed only a Florida domicile. This stance shifted after the judge denied an arbitration bid in August 2026, indicating that proceedings must continue in open court.
Responding to the judge’s position, World Liberty updated its corporate records to 22 entities spanning Florida, Delaware, Puerto Rico, and the UAE. Sun views this abrupt update as a delay tactic to avoid trial.
Sun also criticized the project’s inconsistency between promotional materials and courtroom arguments. In its “gold paper” document, World Liberty marketed itself as a “tax-paying American company.” Yet before the judge, the same project argued it has foreign entities in order to evade litigation.
Roots of the $45 Million Capital Dispute
Sun was World Liberty’s largest early investor after purchasing $30 million worth of WLFI tokens in November 2024. That financial commitment subsequently grew, bringing his total investment to $45 million.
The dispute between the two parties heated up in April 2026 when Sun sued World Liberty over allegations of investment misrepresentation and the unilateral freezing of his tokens. World Liberty countered the lawsuit by accusing Sun of shorting WLFI tokens to suppress market prices.
Next Chapter in California Court
For Sun, the legal fight is not over. The TRON founder affirmed he will refile his lawsuit in California state court as soon as the judge resolves the sanctions motion.
While using foreign entities may succeed in shifting the case away from federal court, the core investment allegations still await resolution at the state level. For WLFI token holders, the case illustrates how corporate claims in promotional sheets can shift when faced with demands for investor refunds.
Reported by Decrypt.
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Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
