A prison grievance filed by Wisconsin prosecutors towards Circle, the corporate behind USDC, has put an uncomfortable query again within the highlight. Why does the world’s second-largest stablecoin issuer seem far much less keen than Tether to assist regulation enforcement recuperate stolen crypto?
An ICIJ investigation printed on July 8 factors to 3 points driving the talk. Circle insists it solely freezes funds after receiving legitimate authorized orders, disputes claims it could actually merely burn and reissue stolen tokens, and rejects allegations from New York prosecutors that it income by leaving frozen property untouched. In the meantime, critics say that the coverage leaves rip-off victims ready whereas their cash disappears.
The case began with a romance rip-off in Walworth County, Wisconsin. A resident recognized solely as “Sufferer #1” was satisfied to purchase USDC and ship about 381,000 tokens to what turned out to be a faux funding platform. After investigators traced the funds, a decide ordered Circle to freeze the pockets. The corporate did so immediately.
Months later, the court docket took the following step. It ordered Circle to invalidate these frozen tokens and subject the identical quantity of contemporary USDC to the Walworth County Sheriff’s Workplace. Circle refused, saying it doesn’t have the technical skill to burn and reissue USDC held inside another person’s pockets. Prosecutors responded with a prison grievance, an uncommon transfer towards an organization of Circle’s dimension.
Circle later requested the court docket to dismiss the case. It argued the Wisconsin court docket lacked jurisdiction and stated prosecutors ignored various proposals it had provided to compensate the sufferer. Walworth County prosecutor Thomas Binger stated the dispute exhibits how shortly scammers can transfer funds in contrast with the tempo of the authorized system.
ICIJ: Circle Faces Felony Criticism in Wisconsin Over Refusal to Recuperate Rip-off Sufferer Funds
An ICIJ investigation reported that regulation enforcement authorities in Wisconsin and New York accused Circle of refusing to help in freezing or recovering rip-off victims’ USDC. Wisconsin… pic.twitter.com/QZv7PNN0Du— Wu Blockchain (@WuBlockchain) July 9, 2026
The Wisconsin case isn’t the one one elevating questions. Earlier this yr, New York prosecutors informed U.S. senators that Circle usually requires court docket orders earlier than freezing USDC and has not constantly returned stolen funds after courts accepted their launch. Since stablecoin transfers settle inside seconds, investigators argue useful time is usually misplaced earlier than authorized paperwork is full.
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The Debate Over Frozen Funds
New York prosecutors additionally made a extra severe allegation. They argued Circle continues incomes curiosity on reserve property backing frozen USDC, giving the corporate little monetary incentive to return these funds shortly. Circle has not accepted that declare.
Blockchain researcher Yury Serov estimates that a minimum of 119 million USDC is presently frozen. These tokens can not transfer, however they continue to be backed by reserve property until one other course of removes them completely.
Circle’s technical rationalization has additionally drawn criticism. Joshua Cooper-Duckett of Cryptoforensic Investigators informed ICIJ the corporate might replace its sensible contracts to assist burning and reissuing tokens held in third-party wallets. Circle didn’t reply when requested whether or not it might make these modifications.
One element from the court docket filings caught investigators’ consideration. Circle disclosed it had already mentioned a sufferer compensation course of with federal prosecutors that concerned completely freezing stolen tokens earlier than issuing substitute USDC. The corporate didn’t clarify whether or not that association applies outdoors federal instances.
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Circle USDC vs. Tether’s Mannequin and the 30x Hole
The distinction between Circle and Tether is tough to disregard. AMLBot knowledge exhibits Tether froze about $3.3 billion in USDT throughout greater than 7,200 wallets between 2023 and 2025. Circle froze about $109 million in USDC over the identical interval, a 30 occasions hole by worth.
A part of that distinction comes from Tether’s burn and reissue course of. After freezing stolen USDT, the corporate can destroy these tokens and subject clear replacements to regulation enforcement or victims.
Tether says it has already reissued round $1.1 billion and frozen $4.7 billion linked to illicit exercise. Circle doesn’t presently provide the identical public course of for third-party wallets, though its court docket filings present it has mentioned comparable preparations with federal authorities.
The businesses additionally draw the road elsewhere. Tether has stated it generally acts earlier than courts turn out to be concerned if regulation enforcement requests assist. Circle says it solely responds by formal authorized course of, arguing that the strategy protects customers from wrongful or politically motivated freezes. Investigators counter that by the point these orders arrive, stolen crypto is usually lengthy gone.
Milwaukee County detective Scott Simons informed ICIJ he has labored on greater than a dozen instances the place Circle both declined an early freeze request or the place the court docket order got here too late. For a lot of victims, he stated, the reply is solely that the cash is gone.
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The submit Felony Criticism In opposition to Circle Places USDC Freeze Coverage Below a Microscope appeared first on Cryptonews.