Crypto Founders: From $2.5M DeFi Exploit Loss to a Staggering $65M Gain

Imagine losing millions in a crypto venture, only to bounce back within months and make tens of millions more. This isn’t just a hypothetical scenario; it’s the reality for certain Crypto Founders navigating the volatile world of decentralized finance (DeFi).

The Painful Reality of a DeFi Exploit: The Dough Finance Story

The story begins with Dough Finance, a DeFi platform based in Florida that aimed to offer leveraged returns through a strategy called ‘looping’. However, in July 2024, the platform suffered a significant DeFi Exploit, resulting in a loss of approximately $2.5 million from user accounts. This incident effectively halted operations and devastated investors.

Founded by Chase Herro and Zak Folkman, Dough Finance attracted users with the promise of high returns using strategies like looping. Here’s a simplified look at how looping works:

An investor deposits crypto as collateral into a lending protocol.
They borrow another crypto asset (often a stablecoin) against this collateral.
The borrowed crypto is used to buy more of the original asset.
This cycle of depositing, borrowing, and buying is repeated, increasing exposure to the original asset.

The goal is amplified profits if the asset’s price rises. Unfortunately for Dough Finance users, the increase in price never materialized in a way that could withstand a targeted attack. Hackers exploited a vulnerability in the smart contract, siphoning off roughly $2.5 million in cryptocurrencies. This loss was a critical blow to Dough Finance.

For investors like Jonathan Lopez, who reportedly lost $1 million after being guided through the looping strategy by co-founder Chase Herro, the consequences were severe. Despite initial promises of compensation using proprietary tokens, only a fraction ($281,000) was ever recovered. Communication ceased by August 2024, leading Lopez to file a fraud lawsuit against Herro in May 2025, with a trial set for April 2026. This case highlights a growing trend: investors are increasingly turning to legal action when crypto projects fail and informal assurances fall apart.

Relaunching Under a New Name: The Rise of World Liberty Financial

Remarkably, just two months after the collapse of Dough Finance, Herro and Folkman launched a new platform: World Liberty Financial (WLFI). Debuting in September 2024, WLFI quickly gained attention, partly due to reported connections with prominent figures, including former US President Donald Trump and his sons. This partnership was reportedly facilitated by Steve Witkoff, a real estate developer.

With fresh capital, WLFI began acquiring significant crypto assets like ETH, WBTC, USDC, and USDt. The platform features a non-transferable governance token called WLFI, an unusual choice for a platform marketing itself as decentralized.

The significant controversy surrounding WLFI wasn’t about the token design but the revenue distribution. After two token sales, including a large round in March 2025, the platform claimed to have raised $550 million. However, the revenue split was highly centralized:

75% of net protocol revenue went to DT Marks DEFI, an entity reportedly linked to the Trump family.
The remaining 25% went to a company owned by Herro and Folkman.

This structure reportedly resulted in the Trump family receiving $400 million and the former Dough Finance founders pocketing at least $65 million. This represents a dramatic turnaround from their $2.5 million loss just a year prior.

Critics quickly pointed out the contradiction between WLFI’s decentralized branding and its highly centralized revenue structure. The reappearance of Herro and Folkman, especially while legal issues from their previous venture remain, fueled further backlash.

Beyond WLFI: The Expanding World of Trump Crypto Projects

Trump Crypto Projects are becoming an increasingly notable part of the digital asset landscape. World Liberty Financial is just one example within a growing ecosystem. Earlier in the year, a memecoin called Official Trump (TRUMP) launched on Solana, followed by Official Melania Meme (MELANIA). Eric Trump co-founded American Bitcoin, a mining company, with Donald Trump Jr. listed as a stakeholder. Most recently, in June 2025, Trump Media and Technology Group proposed a Bitcoin ETF, the Truth Social Bitcoin ETF, to the SEC. These ventures highlight the merging of politics, personal finance, and crypto, a space where Herro and Folkman have now positioned themselves.

What Happened to Dough Finance’s Promises?

Following its July 2024 collapse, Dough Finance released a recovery plan aimed at compensating users. The plan included several steps:

Redistribute recovered funds proportionally via a governance vote.
Issue Dough tokens to cover unrecovered losses, intended for use within the platform.
Implement a burn-and-redeem mechanism to allow token holders to exchange tokens for future recovered funds.

They also acknowledged support from cybersecurity firm Seal 911 and promised transparency. However, affected users state that none of these promises were fulfilled. The governance vote never happened, the Dough tokens were never usable or listed, and no funds were recovered beyond the initial $281,000 partial reimbursement. By June 2025, the platform had gone silent, leaving investors to pursue legal avenues.

Jonathan Lopez’s lawsuit against Chase Herro reportedly alleges misrepresentation, securities fraud, and breach of fiduciary duty. The outcome of this case, set for April 2026, could influence how courts handle cases involving DeFi founders who provide direct guidance to investors on high-risk strategies.

Furthermore, under Florida law (CS/HB 273), platforms transmitting user funds may require a money transmitter license. If Dough Finance operated without one, it could face regulatory scrutiny as an unlicensed money services business. As of mid-2025, no criminal charges have been filed, but Florida’s Office of Financial Regulation is monitoring digital asset fraud cases, suggesting the legal and regulatory scrutiny may continue.

Is World Liberty Financial Safe? Learning from the Past

After raising significant capital and aligning with a high-profile name, WLFI might appear successful. But for those familiar with the journey from Dough Finance to WLFI, a crucial question remains: Is it safe?

The history offers cautionary signs. Dough Finance promised innovative DeFi and post-hack recovery but delivered silence and unrealized tokens. Today, the same founders, facing fraud allegations, control a new platform with more capital and complexity. WLFI’s design, with a non-transferable token and centralized revenue distribution, differs significantly from the decentralized ideals often associated with DeFi.

What can investors learn from this?

Evaluate track records, not just marketing or affiliations.
Political connections or significant funding don’t guarantee transparency or security.

The emergence of WLFI in the wake of Dough Finance’s failure serves as a powerful reminder: in DeFi, a second chance doesn’t automatically mean a safer or more accountable project. If you’re considering WLFI, ask yourself: Would you trust your funds with founders still facing legal challenges from their last project? Being cautious is not paranoia; it’s vigilance. In the DeFi space, recycled founders don’t always bring recycled accountability. The past suggests this project warrants careful scrutiny.