Two crypto firms with links to Trump family-backed company World Liberty Financial are embroiled in a $141mn legal battle that has shed light on controversial “over-the-counter” deals popular in digital assets.
British Virgin Islands-based DWF Maas and Panama-based sister company Falcon Digital have sued BitGo, claiming it breached contracts by selling digital tokens before agreed lock-ups expired, causing the tokens’ prices to fall. DWF Maas and Falcon are part of Dubai-headquartered market maker and investor DWF Labs.
In a lawsuit filed in London’s High Court, DWF and Falcon allege they entered into agreements to sell Falcon Finance tokens at a discount to BitGo, which would then be subject to a three-month lock-up, plus further vesting lock-ups. DWF and BitGo also entered into an agreement with the same lock-up structure for ESPORTS tokens, which are used for electronic sports and gaming, according to the lawsuit.
Private “over-the-counter” token sale agreements are common in the crypto industry as a way for token founders to raise money without dumping assets on to the market and depressing the coin’s price. In return, traders receive discounted tokens that can be sold once the lock-ups expire.
However, they rely on trust between the two parties and their opacity means they are controversial, especially in the eyes of retail investors, who can be exposed to dumping after token vesting periods expire.
DWF claims BitGo sold its Falcon Finance and ESPORTS tokens before the lock-ups expired, breaching the contract. It said the “sale of its FF Tokens was sudden and unexpected” and “flooded the highly illiquid and concentrated” market, therefore “causing a reduction” in the token’s price.
BitGo declined to comment on the lawsuit.
DWF said: “The discount BitGo received was conditional on the tokens remaining locked, and they were moved to exchanges roughly two months before the first unlock. We raised this with BitGo in April and May, and with no undertaking forthcoming, court action became necessary. We remain hopeful of, and open to, resolution.”
The purpose of the lock-ups for both tokens was to ensure DWF could “actively build and launch a number of products during the lock-up period” in order to “materially improve” the assets’ liquidity, it said in the lawsuit.
Falcon Finance tokens fell from $0.08 in early March when the first lock-up was agreed to about $0.07 by late April, according to CoinMarketCap data. ESPORTS tokens fell from about $0.28 in mid-March to $0.07 by early June, around when DWF alleges BitGo sold the tokens.
DWF is seeking $141mn in damages, saying BitGo’s token sales “resulted in direct losses” for the company because of the fall in the value of the Falcon Finance and ESPORTS tokens that it still held.
“There is no contractual or other legal excuse for BitGo’s conduct in transferring or selling” the tokens, DWF said in the lawsuit.
DWF last year bought $25mn worth of tokens created by World Liberty Financial, a crypto venture backed by Donald Trump and his sons. BitGo issues and custodies World Liberty’s stablecoin. Its chief executive personally donated $50,000 in bitcoin to, and hosted a fundraiser for, Trump’s 2024 presidential campaign.
BitGo was founded in 2013 and is one of the biggest crypto custodians. Its chief executive, Mike Belshe, has appeared at White House crypto events and has praised the administration’s approach to digital assets. The company listed in New York at the start of this year but its shares have plunged by about 60 per cent since.
Andrei Grachev, who founded DWF in 2022, previously worked in Moscow as the head of crypto exchange Huobi’s Russian business and at the Russian Association of Cryptoindustry and Blockchain.
After DWF bought $25mn of the World Liberty Financial tokens last year, a Democrat member of the US Senate Committee on Homeland Security wrote to WLF raising concerns over its dealings with foreign nationals, saying that DWF’s management “previously managed Russian firms accused of enabling Russian banks to bypass sanctions”.
“We maintain a normal business relationship with World Liberty Financial as per our past announcements and publicly available information. The accusation by the Senate member is unfounded,” DWF said.
In 2024, one of DWF’s partners was accused of spiking a woman’s drink in Hong Kong, and was later fired, with the company saying the allegations were “deeply concerning”.