What Are the Allegations Against Circle?
Blockchain investigator ZachXBT has accused Circle, the issuer of the USDC stablecoin, of failing to freeze or blacklist approximately $420 million in illicit fund flows since 2022. The claims span 15 separate hack and fraud cases, including incidents linked to North Korean state-affiliated actors.
According to ZachXBT, Circle either took minimal action or failed to act entirely in cases where it had the technical ability to intervene. The allegations center on the company’s role as a centralized issuer with control over freezing funds and blacklisting wallet addresses.
The criticism focuses on several high-profile exploits. In the July 2025 GMX decentralized exchange hack, Circle allegedly did not freeze $9 million in USDC. In the May 2025 Cetus Protocol exploit, wallets were blacklisted only after the stolen USDC had already been converted into Ether.
How Did the Drift Protocol Exploit Highlight These Issues?
The most recent case cited is the Drift Protocol exploit, where attackers moved over $232 million in USDC. ZachXBT said the funds were bridged from Solana to Ethereum across more than 100 transactions over a six-hour period without intervention.
“The exploiter used CCTP to bridge approximately 232 million USDC from Solana to Ethereum across 100+ transactions over six consecutive hours. 10+ additional DeFi protocols across the Solana ecosystem were indirectly impacted,” ZachXBT said. “Despite the attacker laundering funds over six consecutive hours across Circle’s own native bridge, no USDC was frozen.”
Blockchain analytics firm Elliptic has identified indicators suggesting links between the exploit and North Korea, adding a geopolitical dimension to the incident.
ZachXBT argued that repeated inaction has had measurable consequences across the ecosystem.
“Nine figures were lost from the ecosystem because of repeated inaction across three years on law enforcement requests, private sector requests, and their own infrastructure. The $420 million-plus only accounts for major public cases. The real figure is likely significantly higher.”
Investor Takeaway
How Has Circle Responded to the Claims?
Circle has not directly addressed each allegation but reiterated its compliance framework. A company spokesperson stated that the firm freezes assets when legally required and operates within established regulatory standards.
“Circle is a regulated company that complies with sanctions, law enforcement orders, and court-mandated requirements. We freeze assets when legally required, consistent with the rule of law and with strong protections for user rights and privacy.”
The company also pointed to the broader need for coordination across the digital asset ecosystem, noting that incidents such as the Drift exploit highlight gaps in shared security infrastructure.
Circle has previously taken enforcement action, including freezing USDC tied to sanctioned Tornado Cash addresses in 2022. It is also exploring additional safeguards, including reversible transaction mechanisms that could allow funds to be recovered in cases of theft or fraud.
What Does This Mean for Stablecoin Governance?
The allegations have triggered debate over the responsibilities of centralized stablecoin issuers in a decentralized ecosystem. While firms like Circle have the ability to freeze assets, intervention decisions involve legal, operational, and reputational considerations.
The case highlights a structural tension. Stablecoins are marketed as secure, regulated instruments, yet their effectiveness in mitigating illicit flows depends on timely and coordinated action across multiple stakeholders, including issuers, exchanges, and law enforcement.
As one of the largest stablecoin providers, with more than $77 billion in circulating supply, Circle plays a central role in digital asset liquidity. Any perceived gaps in enforcement can influence how institutions and regulators assess risk in using stablecoins for payments, settlement, and trading.
ZachXBT framed the issue as one of accountability tied to scale and regulatory positioning.
“Circle builds good products, and I hold USDC myself. This isn’t a post about hoping they collapse,” he said. “But the decisions they’ve made around compliance have had real consequences for real people … They have every tool and resource available to do better. They just haven’t.”
