This isn't exactly breaking news, but Jeremy Allaire, the CEO of Circle Internet (CRCL), recently mentioned that they only freeze coins when a court orders them to do so, unlike USDT, which can move faster in that regard.
Now, Circle is being accused of helping in the conversion of stolen funds and showing negligence because they didn’t freeze the assets taken from the Drift Protocol back in April.
The lawsuit was brought up by Drift investor Joshua McCollum, representing over 100 members, and filed in a Massachusetts district court on Wednesday. They're claiming that Circle let the attackers shift around $230 million worth of USDC from Solana to Ethereum using Circle’s Cross-Chain Transfer Protocol (CCTP) without stepping in for several hours.
Check out more details on this topic on Cointelegraph.
Some folks have issues with USDC since their coins can be frozen, but now USDC is also dealing with these dubious allegations. Honestly, I doubt the people suing Circle have a solid case. If they don't like USDC, they shouldn't use it instead of throwing around these unfounded claims.
It was only a matter of time before this happened and I suspect there will be many more lawsuits if Circle continues with this approach. They are a centralized company and they intentionally added a blacklist function to their stablecoin. There is a case to be made that they hold a level of responsibility and should be doing more to prevent losses from these major hacks. If they dont want that responsibility, they should decentralize USDC and transfer its governance and management rights to a DAO. They would never do that though because that would mean giving up a lot of their profits.
btw Tether bailed Drift out (https://www.coindesk.com/business/2026/04/16/drift-gets-usd148-million-funding-from-tether-and-partners-as-it-replaces-circle-stablecoin-with-usdt-after-massive-exploit) so the investors are saved but i think they can also win the lawsuit and get a nice compensation from Circle too. after all as a centralised stablecoin issuer you have only one job and they royally failed at it.
The sad thing for us is that they are sort of right, if there are no court orders, they are not forced to freeze any accounts, and that is not helping. If there is a hack in their website, they should stop it, for marketing purposes, so people would feel like that's a safe place, but circle did not, which means that they are going to lose customers left and right.
A company saying "if your money is hacked, we will not care" is not a good PR move at all. Yet, that still doesn't mean that they did anything illegal, and I do not see this case going any further.
Ooooo, this one is gonna be fire another protocol hack, another lawsuit. If I dont mistaken that Tether also want recover some of the hack from the drift protocol while circle still act quiet but now hmmm damnn feel that circle.
I mean if companies, in this case tether and circle dont want to help recover the money atleast they should help to freeze the hacker account after enough evident. Crypto especially defi is got hacked every year with million to billion total losses if this always happen the retail or other investor might didnt want invest again in the future
exactly.
before 2020, when BitMEX and Deribit completely dominated the market of crypto derivative trading, all their trades used Bitcoin as a collateral. that created a huge systemic risk and was an obstacle to growth because in case of a hack Bitcoin would be non-recoverable.
now all platforms use centralised stablecoins for this exact reason - funds can be frozen immediately after a large unauthorised transfer of funds occurs.
its still unclear how they gonna reimburse the investor, this 148m funding sounds like a funding to get the protocol going but not to reimburse investor. They want to make the protocol run and reimburse from revenue which gonna takes decade, my greedy project radar is tingling.
Unless they make clear statement about how they gonna allocate the fresh capital whether to make their users whole or to hoard them by themselves, I won't be too happy yet.
why do you think it would take decades?
i think 25-30% of investors losses can be compensated right away and the rest over time from revenue and OTC token selling from the team and/or the treasury allocation. won't take too long.
also maybe a big share of the lost funds were the protocol's funds, who knows.
Weird!I don't wanna say how dumb people is, but this is very very dumb. They take legal action against Circle instead of the platform that can't keep their money properly. How can?
Circle has ability to freze the address, but it shoud be based on the court's order. The hack happened in matter of hours, and it's so dumb to blame circle due to the stupidity from their own developers.
This is why i said so many times defi is flawed. Theer's no secure place, and no guarantee any defi will be free from the loophole.
What kind of compensation? It's Drift team who can't handle the security in their platform properly. The court is not as stupid as you think.
if the Drift team asked Circle to freeze the funds and Circle ignored (and from what i've seen it seems like that's exactly what happened) then the court can rule that Circle had the technical ability to prevent the loss of funds and even were asked to do so hence it was their fault.
I believe that over time we will not have stablecoins without a freezing protocol. Even DAI has started a similar policy, and therefore we will soon hear about freezing coins for individual cases (daily scam) and the company having complete control over making decisions quickly, which means that an employee can freeze your coins inside your wallet.
While that is true, and maybe that is how the case will go. We have to also remember that there is no responsibility of Circle to block or freeze any account just because someone asked it, and even the owner, because you are not sure if the owner is the owner, and without a court order, freezing an account just because someone asked could also be a liability as well.
What if I act like someone else and try to reach to them to freeze that account? If they do it, in that case they would be the one who is wrong. This is why I am not sure how the case will go, while Circle could lose this, and it will be bad for them, they may still win because if they do not have any legal obligation to do this then they could get away with it.
Circle has no duty to respond quickly to the any developers who has their platform hacked. If it's the reason why they sued Circle due to the slow respond to freeze hacker's address, the case will be dropped by the court.
The funds are Drift's responsibility. You can't really argue the centralized stable coin issuer to protect you from the hack of defi. It should be the defi developers itself who protect your fund.
It's all rooting from Drift's incompetence. This is the consequence when you're going for full decentralization.
Tether have already expressed their willingness to cooperate with all protocols and freeze funds ASAP at their requests. If Circle openly states they are not willing to do the same, the open market economy will determine their fate - protocols will start switching entirely to USDT.
As a publicly listed company, Circle cannot allow that, for the same of shareholders. It's in their best interest to admit their fault and pay some compensation so there is no mass run off from USDC to USDC in the DeFi industry.