Circle faces a class action lawsuit from investors in Drift Protocol, a DeFi platform that suffered a $285 million exploit on April 1. The suit alleges Circle failed to freeze stolen USDC during an eight-hour window when hackers moved $232 million across chains using Circle’s infrastructure. Circle defends its actions, stating it only freezes assets when legally mandated.
Stablecoin issuer Circle is facing a class action lawsuit from Drift Protocol investors who lost money in a recent $285 million exploit of the DeFi protocol. The suit targets Circle’s handling of the exploit, alleging that hackers moved stolen USDC through the firm’s own cross-chain infrastructure.
The lawsuit centers on an eight-hour window during which attackers moved $232 million in USDC from Solana to Ethereum using Circle’s Cross-Chain Transfer Protocol. The hackers had exploited Drift Protocol through pre-signed administrative transfers using “durable nonces,” a legitimate Solana feature they weaponized weeks before the April 1 attack. Drift Protocol subsequently linked North Korean state-affiliated hackers to the attack.
The incident prompted sharp criticism of Circle from within the crypto community. Blockchain investigator ZachXBT accused the firm of having been “asleep” during the Drift exploit, adding, “Why should crypto businesses continue to build on Circle when a project with 9 fig TVL could not get support during a major incident?”
Circle maintains it acted appropriately within legal constraints. “Circle is a regulated company that complies with sanctions, law enforcement orders, and court-mandated requirements,” a company spokesperson said. Chief Strategy Officer Dante Disparte reinforced this position, stating that, “when Circle freezes USDC, it is not because we have decided, unilaterally or arbitrarily, that someone’s assets should be taken from them. It is because the law requires us to act.”
While Circle defended its position, Drift Protocol secured recovery commitments of up to $127.5 million from Tether and $20 million from other partners. Tether CEO Paolo Ardoino positioned his firm as more responsive, stating that, “Tether’s role in the digital assets ecosystem is to provide a platform for individuals and institutions alike that is ready to step forward to help the industry in the moment of darkness.”
The legal action arrives amid broader concerns about stablecoin issuers’ responsibilities. Data shows around $141 billion in stablecoin transactions last year were linked to illicit activity including sanctions evasion and money laundering, while ZachXBT has documented approximately $420 million in suspicious USDC flows since 2022 that went unblocked.
