Circle, the issuer of USD Coin (USDC), is coming under fresh scrutiny over its handling of freeze-and-recovery cases after law enforcement officials in Wisconsin and New York raised concerns about its response to stolen stablecoins, according to an 8 Jul investigation by the International Consortium of Investigative Journalists (ICIJ).
Circle under Fresh Pressure over Victim-Recovery Process in Stolen USDC Cases
9 July 2026 - 08:06 CEST
Circle asserts that it lacks the technical ability to comply with recovery orders, while prosecutors accuse the firm of obstructing asset recovery.
The Drift precedent
The questions come on top of prior incidents, including the 1 Apr Drift hack, when attackers drained around $285mn from the Solana-based decentralized perpetuals exchange. About $232mn in stolen USDC moved through Circle's cross-chain transfer protocol over about six hours without being frozen. Circle said at the time that its policy is to freeze assets only when required by legal process.
Wisconsin: seizure warrant refused
The Wisconsin dispute stems from romance-investment scams reported to Walworth County authorities between December 2024 and August 2025, with combined losses exceeding $1mn, according to ICIJ.
One resident, identified only as "Victim #1," was directed by a person calling herself "Lenora" to convert his savings to USDC, court records show. Circle froze about 381,000 USDC in August 2025 under an initial freeze order, but refused to honour a Walworth County judge's seizure warrant in early December 2025 requiring it to return the funds, prosecutors alleged.
"The tools that are at our disposal are not keeping up with the tools the criminals are using," case prosecutor Thomas Binger said.
Circle called the complaint meritless and said the Wisconsin court lacked jurisdiction, according to ICIJ.
New York: frozen funds, kept interest
In New York, prosecutors said in a January letter to US senators that Circle did not honour court orders seeking to return stolen funds. Because Circle keeps interest-yielding assets in reserve to back its tokens, frozen assets can be lucrative, the officials asserted.
"Circle's motive for not assisting law enforcement becomes crystal clear: it is financially preferable to only freeze cryptocurrency deemed to have been stolen, but not return the underlying asset to law enforcement or any fraud victim, because Circle can continue to collect the interest through investment of the underlying funds," the letter said.
Tether's looser standard
In contrast, Tether Limited, the issuer of Tether (USDT), grants some law enforcement requests without a court order, ICIJ said.
But Tether has drawn its own scrutiny: ICIJ's Coin Laundry project reported that Cambodia-based Huione Group relied on USDT to move at least $1.4bn, including after the US Treasury designated Huione a primary money laundering concern in May 2025.
