WLFI slide puts AI Financial under strain

AI Financial has warned that it may not remain viable over the next year after a steep fall in the value of its World Liberty Financial token holdings exposed the fragility of a balance sheet built around a volatile crypto treasury.

The Nasdaq-listed company, formerly known as ALT5 Sigma, disclosed that it held 7,283,585,650 WLFI tokens at the end of its first quarter, carrying them at a fair value of about $706.4 million against a cost basis of nearly $1.46 billion. The markdown left the company with a large unrealised loss and sharpened questions over whether its treasury strategy can support operating needs while the tokens remain subject to contractual restrictions.

The filing showed a net loss of about $271.5 million for the 13 weeks ended March 28, 2026, on revenue of $4.7 million. Operating activities used $12.3 million of cash, while current liabilities of $39.1 million exceeded current assets of $32.2 million, creating a working capital deficit of about $5.5 million. Management said these conditions raised substantial doubt about the company’s ability to continue as a going concern within one year after the financial statements were issued.

AI Financial’s warning marks a sharp reversal for a company that positioned itself last year as a public-market vehicle for exposure to WLFI, the governance token linked to World Liberty Financial’s crypto ecosystem. ALT5 Sigma announced in August 2025 that it would raise about $1.5 billion through a registered direct offering and a concurrent private placement, with part of the consideration contributed in WLFI tokens. The company said at the time that it would use proceeds to acquire WLFI tokens, build cryptocurrency treasury operations, settle litigation, repay debt and fund operations.

The structure deepened ties between the company and World Liberty Financial. Zach Witkoff, co-founder and chief executive of World Liberty Financial, was named chairman of ALT5 Sigma’s board; Eric Trump was slated to become a director; and Zak Folkman, another World Liberty Financial co-founder, was named as a board observer. Those links placed the treasury strategy under close market scrutiny as WLFI became central to the company’s reported asset base.

Liquidity remains the central concern. AI Financial said all of its WLFI tokens were subject to lock-up provisions as of March 28. The filing said 3.53 billion tokens acquired under a token purchase agreement were non-transferable for 12 months except for limited uses such as collateral, staking or lending that did not involve a sale or permanent transfer. Another 3.75 billion tokens acquired under the securities purchase agreement were also locked for 12 months from closing and depended on specified shareholder approval, charter amendment and resale registration conditions.

Management argued that the WLFI position still represented a significant financial resource, but also acknowledged that monetisation would depend on market conditions and treasury policy. The company said the tokens carried significant market price risk and that there was no assurance they could be sold on favourable terms, or at all. That caveat is critical because the token position dwarfs the company’s operating business, leaving shareholders exposed to a narrow asset base whose value can change sharply over a short period.

AI Financial also drew $15 million on January 29 under a master loan and security agreement with WLFI through an indirect wholly owned subsidiary, receiving about $14.2 million after prepaid interest and lender expense reimbursements. The proceeds were earmarked for a share repurchase programme, additional WLFI token purchases and general corporate purposes. That loan underscored the company’s dependence on the same ecosystem that issued the token dominating its balance sheet.

The company changed its name from ALT5 Sigma Corporation to AI Financial Corporation on April 28 and began trading under the Nasdaq ticker AIFC on April 29, shifting its public identity toward AI-linked financial infrastructure while retaining the crypto treasury exposure. The rebrand followed a period of market pressure, delayed filings and governance scrutiny around the WLFI transaction.

Shares have reflected the pressure. AI Financial’s market capitalisation stood near $153 million on May 19, far below the stated fair value of its WLFI holdings, signalling that investors are applying a heavy discount for token lock-ups, governance risk, liquidity constraints and the company’s ability to convert paper assets into usable capital.

Arabian Post – Crypto News Network