World Liberty Financial is reallocating user funds after a security breach, while simultaneously facing a Senate probe into alleged token sales to entities in sanctioned nations like North Korea and Russia.

World Liberty Financial (WLF), a cryptocurrency project connected to the Trump family, announced on Wednesday that it is working to "reallocate user funds" following a security incident that compromised a "relatively small subset of user wallets."

According to the project, the breach was due to "phishing attacks or exposed seed phrases" stemming from "third-party security lapses," and not a flaw in its own platform or smart contracts. WLF stated it has frozen the impacted wallets and is verifying user identities through KYC checks before moving funds to new, secure wallets. The total number of affected users and the value of funds at risk remain unclear.

The announcement comes as the project faces significant scrutiny from U.S. lawmakers.

Senators Call for Investigation into Sanctioned Transactions

Earlier this week, Senators Elizabeth Warren (D-Mass.) and Jack Reed (D-R.I.) called upon the Departments of Justice and Treasury to investigate World Liberty Financial. The senators cited a September report from the watchdog group Accountable.US that alleged "suspicious" WLF token sales to entities in sanctioned regions, including:

• The North Korean hacking group Lazarus.
• A sanctioned Russian "ruble-backed sanctions evasion tool."
• An Iranian cryptocurrency exchange.

It is unclear if WLF's Wednesday announcement about the security breach is directly connected to the senators' letter.

Questions Over On-Chain Analysis and "False Positives"

The allegations have also sparked debate within the crypto security community. Several experts have challenged the on-chain analysis in the Accountable.US report that purportedly linked a specific wallet address to the Lazarus Group.

Nick Bax, founder of Ump.eth, criticized the report, stating, "TL/DR: someone wrote 14 pages about Lazarus based on a funky shitcoin token transfer." He further claimed that an innocent user had approximately $95,000 in WLF tokens frozen as a "false positive" result of the flawed analysis.

Taylor Moynahan, security lead at MetaMask, also questioned the report's findings.

This is not the first time World Liberty Financial—which names Eric Trump, Donald Trump Jr., and Barron Trump as co-founders—has drawn concern from Congress over potential conflicts of interest.