USD1 Stablecoin Briefly Loses Dollar Peg; WLFI Attributes Incident to Coordinated Attack

World Liberty Financial’s USD1 stablecoin traded below $1 for approximately $0.994 on February 23, 2026, before recovering to parity within minutes, according to CoinGecko data. The Trump family-linked DeFi project attributed the depeg to a coordinated attack involving compromised cofounder accounts and disinformation campaigns, though the incident has sparked market confidence concerns and unverified speculation regarding insider activity.

Depeg Event and Market Impact

USD1, the dollar-pegged stablecoin issued by World Liberty Financial (WLFI), experienced a temporary deviation from its $1 peg on February 23. The token fell to approximately $0.994 before rapidly recovering to trade near parity, indicating the disruption lasted only minutes.

The stablecoin currently maintains a market capitalization near $4.8 billion, positioning it among significant dollar-pegged cryptocurrencies by market value. USD1 is redeemable on a 1:1 basis for US dollars, with reserves comprising short-term US government Treasuries and cash equivalents held or maintained by BitGo Trust Co., which serves as the stablecoin’s issuer, according to the project’s website.

WLFI’s Official Response and Attack Claims

World Liberty Financial issued statements through official channels and a company spokesman attributing the depeg to what it described as a coordinated attack. According to the project’s announcement on X, attackers compromised several WLFI cofounder accounts, compensated influencers to spread negative sentiment (“FUD”), and opened short positions in WLFI tokens to profit from induced market volatility.

David Wachsman, World Liberty Financial spokesman, stated: “World Liberty’s elite engineering and security teams today successfully repelled a coordinated attack from multiple vectors. Hackers and paid-disinformation campaigns attempted to undermine trust in WLFI, but our battle-tested infrastructure and systems operated exactly as they should. Today’s attack is a further demonstration that USD1 was properly designed and can be relied upon under any conditions.”

The company has not released technical details regarding the alleged attack vectors, compromised accounts, or specific security measures that responded to the incident.

Structural Distinctions and Market Context

USD1 operates with full 1:1 reserve backing through BitGo Trust Co., distinguishing its mechanism from algorithmic stablecoins that maintain pegs through arbitrage mechanisms rather than direct asset reserves. This structural difference positions USD1 differently from TerraUSD, the algorithmic stablecoin whose 2022 collapse triggered widespread regulatory scrutiny and market contagion.

Despite this structural distinction, the incident has generated market confidence questions regarding stablecoin vulnerability to coordinated attacks and the adequacy of reserve transparency mechanisms. Stablecoins depend substantially on user confidence, as even brief depeg events can precipitate rapid redemptions if market participants question reserve sufficiency or issuer solvency.

Unverified Speculation and Investigation Announcement

The depeg event coincided with unverified social media reports claiming that Eric Trump deleted previous promotional posts related to USD1 during the volatility period. These claims rely on circulated screenshots without independent verification or confirmation.

Separately, blockchain investigator ZachXBT announced plans to release findings later this week regarding alleged insider trading involving an unidentified major cryptocurrency company. Social media speculation has connected this announcement to WLFI, though no evidence currently supports this association. The investigator has not named any firm in connection with the forthcoming disclosure.

Regulatory and Compliance Considerations

USD1 operates within an evolving regulatory landscape for stablecoins, including ongoing legislative developments such as proposed US stablecoin frameworks and the European Union’s Markets in Crypto-Assets Regulation (MiCA), which imposes specific reserve and transparency requirements on stablecoin issuers.

World Liberty Financial represents a digital asset venture associated with business entities linked to Donald Trump and his family. The project lists President Donald Trump as “co-founder emeritus” and was co-founded by Donald Trump Jr. and Eric Trump alongside sons of White House special envoy Steve Witkoff. The project previously gained attention in May 2025 when an Abu Dhabi fund reportedly committed to using USD1 for a $2 billion Binance stake acquisition, and following Wall Street Journal reporting regarding a $500 million investment transaction involving an Abu Dhabi royal four days prior to the presidential inauguration.

Frequently Asked Questions

What caused the USD1 stablecoin to lose its peg?

World Liberty Financial attributes the February 23 depeg event to a coordinated attack involving compromised cofounder accounts, paid disinformation campaigns, and short positions opened to profit from panic selling. The company states its security systems repelled the attack, enabling rapid recovery. The token briefly traded at $0.994 before returning to parity within minutes.

Who issues the USD1 stablecoin and what backs it?

USD1 is issued by World Liberty Financial (WLFI), a DeFi project associated with business entities linked to Donald Trump and his family. The stablecoin maintains full 1:1 reserve backing consisting of short-term US government Treasuries and cash equivalents, held or maintained by BitGo Trust Co., which serves as the issuer of record. This reserve structure differs from algorithmic stablecoins that maintain pegs through trading mechanisms rather than direct asset backing.

What investigations are ongoing regarding the USD1 incident?

Blockchain investigator ZachXBT has announced plans to release findings later this week regarding alleged insider trading involving a major cryptocurrency company, though has not named any specific firm. Social media speculation connecting this investigation to WLFI remains unverified. The company has not disclosed whether any formal regulatory investigations have commenced regarding the depeg event.