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An asset management firm that heavily purchased tokens from a cryptocurrency platform supported by the Donald Trump family is facing a crisis of statutory management due to massive dollar losses.
According to cryptocurrency media outlet Cointelegraph on May 20 (local time), AI Financial Corp., a financial management firm for World Liberty Financial tokens, announced that its corporate survival is uncertain for the next year due to a lack of operating funds and increasing debt. AI Financial, where World Liberty CEO Zach Witkoff serves as Chairman of the Board, recorded a net loss of $271.5 million in its first-quarter earnings. This represents an explosive increase in losses compared to the same period last year, when it posted a net loss of $2.4 million. The company, formerly known as ALT5 Sigma, currently has assets of $32.2 million and liabilities of $39.1 million, resulting in a capital deficit of $5.5 million.
AI Financial explained that these financial conditions raise significant doubt about the company's ability to continue as a going concern within one year of the financial statement's issuance. AI Financial participated in the cryptocurrency buying frenzy among listed companies by massively purchasing WLFI, the native token of a platform supported by the Trump family. The company stated that it held 7.3 billion WLFI tokens, valued at approximately $70.34 billion as of March 28, to meet its debt obligations, but it could not avoid a collapse in value.
The value of AI Financial's WLFI holdings plummeted to one-third of their value compared to late December last year, when the token was valued at over $1 billion. The unrealized losses resulting from this amount to $348.3 million. The company initially paid nearly $1.46 billion to acquire these tokens. As its financial difficulties deepened, AI Financial borrowed an additional $15 million in January through a loan agreement from Trump-affiliated World Liberty. It added that the funds could be used for share buybacks and further purchases of WLFI tokens.
Compounding the negative news, AI Financial's stock, listed on the New York Stock Exchange, plummeted 10% on Monday and fell an additional 6.3% to close at 85 cents on Tuesday. Over the past 12 months, the company's stock price has crashed by 87.5%. AI Financial sought to transition into a WLFI financial agency firm from early August last year, after completing a $1.5 billion direct public offering and private placement led by World Liberty Financial.
Following the signing of the agreement, Witkoff assumed the role of chairman, and World Liberty co-founder Zak Folkman joined as a board observer. Eric Trump, son of President Trump, also joined the board but was quietly removed from the leadership section of the company's website late last month. According to Google Finance data, Trump-backed Truth Social has also withdrawn its application for a spot cryptocurrency ETF.
*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*
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