Circle faces a class action lawsuit alleging it failed to freeze $280 million in stolen USDC from the Drift Protocol exploit. The suit claims the stablecoin issuer aided North Korea-linked hackers by allowing them to use its bridge. Meanwhile, an analyst argues that unilateral freezes would undermine the permissionless principles that make USDC viable for institutional use.
A California-based legal group has filed a class action lawsuit against Circle following a $280 million exploit on the Solana-based Drift Protocol. The suit alleges Circle stood by while North Korea-linked hackers moved millions in stolen USDC through its bridge, making it liable for investor losses.
Circle CEO Jeremy Allaire stated the company only acts when the law requires it. He said the company does not step away from legal obligations to make judgment calls, even when the moral calculus feels obvious.
In response to criticism, ARK Invest research director Lorenzo Valente claimed that freezing funds without a legal order would make USDC “whatever Circle feels like that day.” He argued that due process is a product feature, as stated institutions rely on the fact that Circle cannot arbitrarily zero out balances.
Valente warned that a unilateral freeze could trigger a domino effect across DEXs, bridges, oracles, and wallets. “The whole point of permissionless onchain finance is that none of these actors get to play judge,” he wrote. He also noted the legal risk of freezing tokens that may have moved to innocent counterparties.
Legal commentator Jacob Robinson called the lawsuit’s allegations “dangerous, precedent-setting.” The suit claims Circle had an affirmative duty to recognize the harm and freeze assets.
Separately, Drift Protocol announced a new collaboration with Tether totaling nearly $150 million. The plan includes a relaunch where USDT replaces USDC for settlements.
