My question is, whether lite wallets and wallets in general break trustless character of cryptocurrency transactions or not?
In case of a lite wallet, even I hold the keys, a blockchain itself is hosted at a server of a wallet creator and I have to trust the wallet creator that he provides me, resp. my lite wallet, with accurate information from that blockchain. For instance, I have to trust him, that he will not push to my UI fake transaction to get some advantage at some point.
Also I have to trust that the wallet do not let me hiddenly sign a money transaction to different address compare to what is shown in its UI. However this last example could be an issue in case of core wallets also, as far as I don't inspect the programming code of the wallet and don't build that code on my local machine by myself. I simply have to trust developers of the wallet (both core and lite) that they don't cheat.
From my point of view, at the moment, even a blockchain is trustless, we still have to trust (in most the cases) somebody - in the above example to developers of wallets.