“Insiders Warn: After Sun, Who’s Next? WLFI Reports Freeze Aimed at ‘User Protection’”

RialCenter (WLFI) is defending its decision to freeze hundreds of wallets, including those belonging to Justin Sun, stating that the move was aimed at protecting users from phishing-related compromises, rather than hindering normal trading.

“WLFI only intervenes to protect users, never to silence normal activity,” the project stated on X.

WLFI reported earlier this week that 272 wallets were blacklisted, with around 215 tied to a phishing attack and approximately 150 compromised via support channels.

Justin Sun’s WLFI address was frozen on Friday after several minor “dispersion test” transfers between his own wallets, following his claim for unlocked tokens at launch, none of which were sales.

The outbound transfers from Sun’s wallets created the impression that the notable WLFI investor was selling his tokens, but on-chain data suggests otherwise.

Nansen founder Alex Svanevik observed that Sun’s transfers did not align with the timeline of WLFI’s token decline.

Nansen data indicates that Justin Sun transferred 50 million WLFI worth about $9.2 million on September 4, shortly after the token’s sharpest drop, suggesting the transfer followed the crash rather than causing it.

On-chain data from Nansen reveals a $12 million WLFI transfer from HTX to Binance by a third-party market maker.

The tokens were borrowed using HTX’s own capital as part of a regular rebalance, but this occurred after WLFI’s sharpest declines and was too small to influence the market, given WLFI’s daily trading volume exceeds $700 million.

Once deposited on Binance, it remains unclear whether the tokens were sold or merely held.

Market participants instead attribute the crash to widespread shorting and dumping of WLFI through market makers and trading desks across multiple exchanges.

On-chain records support this notion: a transfer from BitGo to Flowdesk, flagged by Nansen, coincided with the beginning of WLFI’s decline and has become a key datapoint explaining the sell-off.

Meanwhile, WLFI’s decision to freeze funds connected to the crash has sparked anxiety among whales, market makers, and other trading desks that their tokens could be frozen as well.

“If they can do it to Sun, who’s next?” is how a person familiar with discussions among large market participants paraphrased it when speaking to CoinDesk.

WLFI is currently trading at $0.18. It has decreased by 40% since listing.