Circle Faces Allegations of $420M Compliance Lapses from ZachXBT Investigation
The USDC issuer had opportunities spanning hours to days to freeze illegitimate funds across 15 documented incidents but reportedly took no action, ZachXBT reveals.
Blockchain investigator ZachXBT has alleged that Circle, the company behind the USDC (USDC) stablecoin, has neglected to freeze or blacklist approximately $420 million in illegitimate fund movements beginning in 2022.
Although Circle possesses the capability to freeze illicit funds and blacklist wallet addresses, the company either implemented "minimal" measures to halt illegitimate flows or completely failed to respond across 15 distinct hack-and-fraud incidents, which included cases associated with North Korean (DPRK) state-sponsored hackers, according to ZachXBT's claims.
The stablecoin provider purportedly neglected to freeze $9 million in USDC stemming from the GMX decentralized exchange (DEX) hack that occurred in July 2025, and only blacklisted wallets connected to the $200 million Cetus DEX hack in May 2025 after the USDC had already been swapped into Ether (ETH), as reported by ZackXBT.
Circle also failed to freeze $232 million in illegitimate flows originating from the Drift Protocol Hack that took place on Wednesday, even though the attackers had a six-hour window during which they converted USDC to ETH across more than 100 separate transactions, he further noted.
"Circle builds good products, and I hold USDC myself. This isn't a post about hoping they collapse," he stated, while emphasizing that the failure to freeze these illegitimate flows has resulted in "real consequences for real people." He said:
"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."
Cointelegraph reached out to Circle but did not receive an immediate response by the time of publication.
The absence of asset freezing actions has ignited a digital debate within the cryptocurrency community regarding the role and obligations of centralized service providers, particularly as blockchain protocols and their users face ongoing threats from hacks and cybersecurity exploits that result in fund drainage.
Circle investigates "reversible" USDC transaction functionality
During September 2025, Heath Tarbert, the president of Circle, announced that the company was investigating "reversible" USDC transactions that would allow transactions to be rolled back or modified in situations involving hacks, theft and fraud.
Circle has frozen USDC funds and blacklisted wallets on multiple occasions, including freezing USDC held by Tornado Cash addresses sanctioned by the US Office of Foreign Assets Control in 2022.