World Liberty Financial, the crypto venture co-founded by Donald Trump and his sons, said on Monday it had filed a defamation lawsuit in Florida state court against the Hong Kong-based crypto entrepreneur Justin Sun, as a dispute escalates between the project and one of its most prominent backers.

World Liberty posted a copy of its lawsuit on X in which it accused Sun of launching a “public smear campaign”. It alleged that Sun had improperly transferred some of his WLFI tokens that come with voting and governance rights to crypto exchange Binance and, separately, that he had placed bets that WLFI would decline in market value, known as short selling. That was part of a coordinated effort to push the token’s market price down as public trading began in September, the lawsuit alleged.

“Justin Sun engaged in a defamatory campaign to torch World Liberty Financial’s reputation. He knew his claims were false and made them anyway to harm WLFI token holders,” Zach Witkoff, World Liberty’s CEO, said in a separate post on X on Monday.

Sun told Reuters: “The alleged defamation lawsuit that World Liberty announced on X today is nothing more than a meritless PR stunt. I stand by my actions and look forward to defeating the case in court.” He posted the same message on X.

In April, Sun sued World Liberty, saying the company had illegally frozen the tokens he had bought. Sun said World Liberty secretly installed tools to prevent the sale of his tokens after they became tradable in September 2025. In that lawsuit, Sun denied shorting WLFI’s token.

In the legal action on Monday, World Liberty said its ability to freeze tokens had been disclosed in the terms of sale.

World Liberty’s token rallied after news of the lawsuit, gaining about 12% over the last 24 hours, but is overall down about 72% since it began trading on 1 September. Sun’s stake of 4bn tokens in World Liberty is currently worth around $264m.

The war of words and lawsuits between World Liberty and Sun, a high-profile crypto billionaire, is a sharp reversal of a previously rosy relationship.

Sun’s early backing of World Liberty in late 2024 and early 2025, when he bought $45m worth of its tokens and was named an adviser to the venture, was critical to getting the project off the ground, Reuters has reported.

World Liberty is the most prominent of several lucrative crypto businesses co-founded or controlled by the Trump family, which has already made more than $1b from World Liberty, according to a Reuters analysis. World Liberty’s bylaws state that 75% of the revenue from WLFI token sales is routed to the Trumps.