A crypto venture recently unveiled by President-elect Donald Trump and his new Middle East envoy, billionaire Steve Witkoff, has partnered with crypto platform Tron following a $US30 million ($47 million) investment.
"Shape a new era of finance", reads World Liberty Financial's website, which also says it is the only decentralised finance (DeFi) platform endorsed by Trump.
World Liberty Financial Inc was founded by the Witkoff family two months before the US election, with Trump as a financial beneficiary.
Six specialists in US government ethics say the Trump-Witkoff venture presents concerns over ethics and conflicts of interest.
But among their biggest concerns is its newest partner Tron, which they, along with authorities, say has been used by criminals and Iran-backed militant groups Hamas and Hezbollah.
Let's break it down.
What is Tron and who is its founder?
Quicker and cheaper than Bitcoin, the Tron network has overtaken its rival as a vehicle for crypto transfers associated with groups designated as terror organisations by Israel, the United States and other countries, Reuters reported in 2023.
The news agency cited interviews with seven financial crime experts and cryptocurrency investigations specialists.
Tron is founded by cryptocurrency entrepreneur Justin Sun, who last month became an adviser to the Trump-Witkoff venture following his $US30 million investment.
Mr Sun is currently under investigation by the US Securities and Exchange Commission where he has been accused of illegally inflating trading volume and concealing payment to celebrities to promote crypto assets, and recently made headlines for eating a $US6.2 million banana artwork he purchased.
Mr Sun said the SEC charges "lack merit" and the case is ongoing.
He earlier wrote on X that he was "excited to help make crypto great again in the US" with Mr Trump's leadership.
The British Virgin Islands-registered Tron is now World Liberty's largest investor, Mr Sun said.
Tron's alleged link to militant wallets
Crypto seizures announced by the Israeli security services since 2021 have frequently singled out Tron's use by militants, including Hamas.
Israel's National Bureau for Counter Terror Financing (NBTCF), which is responsible for such seizures, froze 186 Tron wallets since July 2021.
They said the wallets were used by a "designated terrorist organisation" or for a "severe terror crime."
Of those, Israeli authorities linked 84 Tron wallets to Hamas or Hamas allies, including Islamic Jihad, a further 39 to militant group Hezbollah, and 63 to unspecified terrorist groups or money changers, Reuters reported.
The most recent Tron seizure was announced on March 28 of this year, they said.
News agency Reuters could not independently determine Tron's use by militant groups, and the NBTCF did not provide evidence for its assertions or respond to requests for more details.
Hamas and Hezbollah did not respond to requests for comment.
Tron, which profits from transaction fees on its network, told Reuters its technology "has attracted both lawful users and those with illicit motives" but did not specifically respond to claims it has been used by militants.
The company "has taken proactive measures to address the risk of illicit activities on its network", a Tron spokesperson said in response to questions from Reuters.
A collaboration with law enforcement launched in September froze $US70 million in illicit funds, the spokesperson said.
Mr Sun did not respond to a request for comment.
The US Treasury Department has also seized Tron wallets, including an account linked to a group that the department said raised money for Hamas in the wake of the 2023 attack on Israel.
In March, the Treasury levelled sanctions against a Lebanon-based money changer who it said provided Hezbollah officials with crypto accounts, including a Tron wallet, to receive funds from Iran.
'Red flags all over this'
Tron's investment in World Liberty has raised concerns among ethics experts.
Kathleen Clark, a professor at Washington University in St Louis who specialises in government ethics, said that her concerns include the significant size of Tron's investment in World Liberty, whether Trump could benefit financially from it and the alleged use of Tron by militants including Hamas and Hezbollah.
"There are red flags all over this," she said.
She also highlighted the ongoing investigation of Mr Sun.
Professor Clark additionally questioned whether World Liberty's close relationship with Mr Sun would pose a conflict of interest for Trump once his administration takes over the SEC in January.
According to other crypto experts, militant groups and criminals like Tron because it gives users the option to conceal their identities, charges low fees and can be converted into cash easily, Reuters cited.
Potential conflicts
World Liberty co-founder Mr Witkoff is a close friend of Trump's.
He's a donor to his Republican presidential campaign, was playing golf with the President-elect during his second apparent assassination attempt and testified as an expert witness during Trump's civil fraud trial in New York.
He also has a stake in a company — WC Digital Fi, LLC — that is entitled to some of World Liberty's revenues, according to the company's terms.
He plans to put all his investments in a "blind trust," said a person familiar with Mr Witkoff's plans to Reuters, who declined to be identified.
The source, however, said Mr Witkoff would retain ownership of his assets.
Typically, in a blind trust, an outside manager controls an official's assets, selling off those that pose a conflict and reinvesting the proceeds into investments unknown to the owner.
Mr Witkoff declined to comment.
World Liberty did not respond to requests for comment about potential ethical issues and Tron's investment in the company.
Even with a trust, World Liberty sets up potential conflicts of interest, the ethics specialists told Reuters.
Mr Witkoff's Middle East policy recommendations could be affected by what he sees as best for World Liberty as opposed to the United States, they said.
Even if the billionaire sets up a trust and isn't involved in World Liberty's day-to-day operations, potential conflicts exist so long as he maintains a financial stake in the company, said Richard Painter, ethics counsel to former president George W. Bush and a University of Minnesota professor.
"Whether you're involved in the management of the company or not, that's not relevant at all," he said.
"What's relevant is if you own a financial interest that could be directly impacted by your government work".
Trump also faces potential conflicts from World Liberty, the experts said.
Trump is listed as "chief crypto advocate" on World Liberty's website and is entitled to a cut of its revenues, according to the company's terms and conditions.
World Liberty sells a proprietary token that cannot be traded, those terms and conditions say, unlike Bitcoin and other crypto tokens.
Trump and other unnamed "affiliates" are entitled to 75 per cent of some World Liberty revenues, according to the terms, raising the possibility of people buying World Liberty coins to try to gain favour with him.
The Trump transition team did not respond to a request for information on what steps he would take to address any conflicts from World Liberty.
Crypto industry can policy itself, says Trump's son
Eric Trump that the use of crypto by criminal groups was "everybody's foremost concern" but said traditional financial institutions were also used to funnel "bad money", speaking to Reuters at a crypto conference this week.
"Anything can be manipulated if used by the wrong people, and you have to crack down on it," Trump's second son said.
He added that the crypto industry will do "a great job" of policing itself when it comes to illicit flows.
Spokespeople for Trump and his transition team did not directly respond to questions about Trump's financial ties to World Liberty, the Tron investment and potential conflicts.
"President Trump didn't get into politics for profit," said transition spokesperson Karoline Leavitt.
The Trump transition team did not respond to a request for information on what steps he would take to address any conflicts from World Liberty.
Reuters/ABC
