Stablecoin issuer Circle is facing scrutiny from prosecutors in Wisconsin and New York for allegedly delaying or refusing to comply with court orders to return stolen digital assets to scam victims.
Key Takeaways
Wisconsin charged Circle over a warrant to seize 381,000 USDC stolen in a crypto romance scam.Circle holds 119 million frozen tokens, with critics noting it earns interest on backing reserves.Circle reached a federal deal to permanently freeze flagged USDC and issue new tokens to victims.The warrant reportedly directed Circle to invalidate the frozen tokens sitting in a suspect’s digital wallet and issue an equivalent amount of new USDC to a wallet controlled by the local sheriff’s office. Circle froze the funds immediately when ordered last August but later said it lacked the technical ability to burn and reissue tokens.
However, in response to the latest allegations, Circle maintains that it freezes assets only when compelled through a “lawful process,” arguing this policy protects users from arbitrary or politically motivated interference. The company called the complaint “meritless,” arguing that prosecutors misunderstood its capabilities and failed to engage with alternative solutions.
Crypto-forensics experts say Circle could update its token governance code to support burning and reissuing, but Circle has not confirmed whether such an upgrade is planned.
Functionally, this mirrors the burn-and-reissue process critics say Circle should already support. Circle did not say whether this mechanism could be applied to the Wisconsin case or whether the agreement is part of a binding settlement.
