From the WLFI controversy to ZachXBT's whistleblowing: How should crypto project teams respond to trust crises?

The crypto market of 2025 has just experienced a dramatic night. On February 23rd, the DeFi project World Liberty Financial (WLFI), deeply linked to the family of former U.S. President Trump, and its stablecoin USD1 suddenly faced a severe trust crisis. Almost simultaneously, “on-chain detective” ZachXBT announced an upcoming major investigation into “one of the most profitable companies in the crypto industry,” scheduled for February 26th.

When the event of “political halo project being attacked” overlaps with the “industry whistleblower’s preview,” market nerves are instantly ignited. This is not just another market fluctuation event; it may also signal the official arrival of the era of crypto KOL “whistleblowers.” For project teams, a stark question emerges: in today’s environment where on-chain data leaves no hiding place, how can projects prove their innocence?

The WLFI Incident: Coordinated Attack or Sign of Trust Collapse?

On the evening of February 23rd, Beijing time, WLFI and its stablecoin USD1 became the focus of market panic. The incident started when Eric Trump, the younger son of Trump and co-founder of WLFI, deleted a promotional tweet about USD1. Under the influence of bearish market sentiment, this move was quickly interpreted as a negative signal.

Market reactions were intense and direct. Data showed WLFI’s token price temporarily dropped over 8%, hitting a low of about $0.104; meanwhile, the USD1 stablecoin, which should be strictly pegged 1:1 to the dollar, briefly de-pegged, falling to as low as 0.9802 USDT, sparking fears of a “death spiral.” Subsequently, WLFI’s official team issued an emergency statement claiming they had suffered a “coordinated attack”: attackers infiltrated multiple co-founders’ X accounts, hired paid KOLs to spread FUD (fear, uncertainty, doubt), and massively shorted WLFI tokens to profit from market volatility.

Although WLFI emphasized that their smart contracts and fund wallets were not compromised, and that USD1 quickly regained its peg thanks to sufficient asset reserves, by February 25th, according to Gate’s latest data, USD1 had recovered above $0.999, and WLFI’s trading price had rebounded to around $0.114. However, market doubts remained. Critics questioned: if it was just account hacking, why did the attacker only cancel retweets instead of posting malicious content? The so-called “massive shorting” was not supported by clear on-chain data. This incident exposed how fragile market sentiment can be under information asymmetry.

ZachXBT’s Preview: The On-Chain Sword of Justice for Whistleblowers

If WLFI’s incident exposed an internal crisis, ZachXBT’s preview is a blow from external “justice.” The renowned on-chain detective posted on social media, announcing that on February 26th, he would release a major investigation targeting “one of the most profitable companies in the crypto industry,” alleging that multiple employees had long abused internal data for insider trading.

Although the investigation’s target remains unspecified, the market has already fallen into a “guessing game.” From prediction market giants like Polymarket to projects within the Solana ecosystem such as Meteora and Pump.fun, all are under scrutiny. Because the preview’s timing closely coincides with the WLFI incident, some communities suspect WLFI itself might be a potential target.

Regardless of the specific target, ZachXBT’s announcement sends a clear signal: on-chain data is immutable and transparent, and any misuse of information for improper trading will leave indelible traces on the blockchain. This is the fundamental logic behind the rise of crypto KOL “whistleblowers.” They are no longer just insiders leaking confidential information; instead, they analyze publicly available on-chain data to uncover the truth. When a “project does wrong—KOLs discover and expose it—market reacts,” a closed loop forms, and any project misconduct risks being “blown the whistle” at any time.

The Era of Crypto KOL “Whistleblowers”: A New Order Under Data Transparency

The “attack” statement from WLFI and ZachXBT’s “whistleblower” preview may seem independent but actually point to the same future: the crypto industry is entering a data-driven “whistleblower” era.

In traditional finance, insider trading is often hard to detect, relying on lengthy investigations by regulators. In crypto, all transactions are on-chain. As ZachXBT’s past investigations have shown, by matching suspicious wallet addresses, transaction times, and public events, insider trading chains can be exposed without a doubt.

For projects, this means the “cost of misconduct” is exponentially higher. Whether internal personnel manipulate markets or exploit information advantages to front-run, they can be watched by countless “on-chain eyes” lurking in communities. The huge stir caused by ZachXBT’s preview and the prediction markets on Polymarket about “investigation targets” demonstrate the market’s high attention and recognition of the “whistleblower” culture.

Self-Proving in the Age of Transparency: Survival Rules for Projects

In the face of the upcoming “whistleblower” era, projects can no longer rely solely on press releases to “prove innocence.” To survive this trust crisis, they must establish a defense system based on transparency and verifiability. Here are some suggestions:

1. Embrace on-chain transparency proactively, rather than avoiding it: Projects should openly disclose key addresses, especially treasury wallets, market maker addresses, and team-held tokens. By publicizing these and using platforms like Arkham for tagging, they can prevent malicious speculation in stealth mode. When everyone can monitor these addresses in real-time, accusations of insider trading become much harder to sustain.

2. Establish verifiable on-chain evidence: For incidents like WLFI’s “paid FUD” accusations, projects can consider collaborating with professional on-chain data analysis firms to produce reports on market manipulation. For example, analyzing shorting activity during attack periods can reveal abnormal fund accumulation or position opening. A third-party analysis report is more convincing than vague claims of “being attacked.”

3. Set up internal governance and firewalls: ZachXBT’s investigation centered on “long-term misuse of internal data by employees.” Projects must establish strict information isolation and trading reporting systems internally, using multi-signature wallets and delayed transactions to prevent insiders from exploiting information advantages.

4. Respond to public opinion with a developer’s attitude, not emotional confrontation: During this crisis, WLFI’s quick clarification was marred by weak explanations that fueled conspiracy theories. When facing crises, projects should remain restrained, using data and logic to communicate with the community. For unresolved doubts (like the true reason behind Eric Trump’s deleted post), honesty is better than concealment to buy time.

Conclusion

WLFI’s short-term price fluctuations may settle as USD1 re-pegs, and WLFI’s current trading price on Gate shows signs of stabilization. But ZachXBT’s upcoming investigation report and what it symbolizes—the “crypto KOL whistleblower era”—are just beginning.

On a transparent ledger, every interaction is a permanent record. For projects, the most effective way to “prove innocence” is not post-event explanations but a sense of reverence beforehand. Because in this world built on code and data, only purity can truly serve as self-proof.