Stablecoin issuer Circle has frozen $12.6 million in USDC tokens linked to privacy protocol Zama’s confidential smart contract, according to onchain investigator ZachXBT. The freeze, executed without prior notification to Zama, followed deposits from wallets associated with the Overnight Finance DeFi protocol. This action sets a precedent as funds were commingled with other users. Circle has faced criticism for freezing legitimate project funds while allegedly failing to act on stolen assets in multiple high-profile hacks.
Circle froze $12.6 million in USDC tokens linked to Zama‘s confidential smart contract on Saturday. The exact reason for the freeze remains unclear according to onchain sleuth ZachXBT.
Wallets linked to the Overnight Finance decentralized finance protocol deposited $12.4 million into the Zama protocol on May 11. ZachXBT stated that “it’s precedent-setting to unilaterally freeze the contracts or addresses of a protocol where funds have been commingled with Zama users.”
The Zama team does not appear to have been notified of the Circle freeze prior. The company has come under fire for freezing wallets of legitimate crypto projects without prior notice.
It has also been criticized for failing to freeze funds following major hacks of crypto platforms. In March, ZachXBT accused Circle of wrongfully freezing 16 stablecoin wallets linked to online casinos and legitimate crypto exchanges.
Those wallets were frozen in connection with ongoing U.S. civil court cases. ZachXBT later added that Circle failed to freeze about $420 million in 15 separate cases involving fraudulent transactions or stolen funds since 2022.
These incidents included the failure to freeze $232 million in stolen user funds from the April 2026 Drift Protocol hack. Users subsequently filed a class action lawsuit against Circle for failing to freeze those funds, which flowed through Circle’s Cross-Chain Transfer Protocol.
