Sun alleges the firm, co-founded by US President Donald Trump and his son Eric Trump, has "frozen" all of his tokens and stripped him of his right to vote on governance issues.
Sun is an ardent supporter of Trump and his stance on cryptocurrencies, but accused "certain individuals" associated with World Liberty of acting against the president's values.
"They wrongfully froze all of my tokens, stripped me of my right to vote on governance proposals, and have threatened to permanently destroy my tokens by 'burning' them - all without any proper justification," he said in a social media post announcing the lawsuit.
Sun is the founder of a separate multi-billion dollar crypto project, TRON. He initially invested $45m (£33m) in World Liberty and said that, at times, his WLFI tokens have been valued at more than $1bn (£740m).
Sun said his backing was driven by the Trump family's association with the project and his long-standing support for cryptocurrencies. He also bought $100m of Trump's meme coins in July 2025, as well.
But Sun alleged that those running World Liberty, including another co-founder, Chase Herro, are using it as a "golden opportunity to leverage the Trump brand to profit through fraud".
In his complaint, filed on Tuesday in a San Francisco federal court, Sun argues that initial promises to give token-holders the option to trade the currency in future "were false and misleading".
While the tokens at large became tradeable, Sun said World Liberty has blocked him from being able to sell a single one, and is now threatening to "burn" his - deleting them entirely.
Meanwhile, the Securities and Exchange Commission has dropped its investigation into Sun, with Senator Elizabeth Warren, a Democrat, questioning if it was tied to his investments in Trump's crypto ventures. Sun had been accused of paying high-profile influencers to promote his companies on social media, without the disclosing the payments.