Circle’s USDC Freeze Controversy Unveiled by ZachXBT
- Onchain investigator ZachXBT identified $420 million in illicit USDC flows Circle failed to freeze promptly since 2022.
- The Drift Protocol exploit saw attackers bridge over $232 million USDC via Circle’s Cross-Chain Transfer Protocol without a freeze during U.S. business hours.
- In March 2026, Circle froze USDC balances in sixteen legitimate business wallets tied to a civil case, including DFINITY Foundation’s ckETH Minter contract, with five later unfrozen.
- ZachXBT highlighted multiple cases where Circle did not act promptly, including the Mango Markets exploit and Nomad Bridge hack involving millions in freezable USDC.
- Circle argues that it only freezes assets when legally required to avoid liability and protect user rights.
ZachXBT’s investigation questions Circle’s compliance priorities regarding timely freezes of stolen stablecoins. The investigator highlights several instances where delayed actions allowed illicit activities to proceed unchecked, contrasting with other issuers like Tether who acted faster.
The controversy raises concerns about how legal caution is weighed against real-world losses from illicit activity facilitated by Circle’s infrastructure, as seen in the Drift Protocol and other hacks totaling over $420 million in unfreezed USDC flows since October last year (Source)
