Newly disclosed court documents reveal that Circle restricted Malta-based crypto investment fund Heka from its platform in late 2023, blocking what it deemed suspicious activity tied to Tether. During the Silicon Valley Bank crisis, when USDC temporarily depegged, Heka allegedly redeemed significant amounts of USDC and converted the funds into Tether’s USDT. An arbitrator dismissed Heka’s $49 million claim against Circle, ruling that the fund acted in bad faith and ordering it to cover Circle’s legal expenses. The ruling strengthens Circle’s position and intensifies the debate over stablecoin market behavior and platform restrictions.
Court documents disclosed that Circle blocked Malta-based crypto investment fund Heka from its platform in late 2023. Circle stated it discovered suspicious patterns of Heka redeeming USDC and converting the proceeds into Tether’s USDT during the SVB crisis when USDC temporarily fell below its one-dollar peg.
According to the filings, Circle found unusual amounts of USDC redemptions following the bankruptcy of Silicon Valley Bank. The plaintiff claims Heka made significant redemptions and converted the funds into USDT, allowing Tether to capture market share amid uncertainties about USDC.
The Tether fund Heka had already invested $800 million before the disputed trading activities. Circle claimed the fund engaged in more than arbitrage, exploiting market volatility to secure stability for USDC.
In response, Heka initiated arbitration, claiming the restriction caused losses of nearly $49 million. The arbitrator decided in favor of Circle, stating Heka acted in bad faith, and justified the Tether ban.
The newly released filings provide rare insight into the rivalry between Circle and Tether, the two largest stablecoin issuers. While USDT remains dominant globally, USDC has positioned itself as a compliance-focused alternative with strong institutional adoption.
Experts point out that the dispute demonstrates the increasing importance of surveillance and compliance in stablecoin markets. Though the filings don’t mention any participation of Tether in the disputed trades, they show increasing regulatory focus on market behavior.
