Wisconsin prosecutors have accused Circle, the issuer of USDC, of refusing to comply with a court order to help recover approximately 381,000 USDC stolen from a resident in an investment scam. Circle froze the assets after an initial order but ignored a subsequent directive to invalidate and reissue the tokens to law enforcement for victim reimbursement. The company argues it lacks the technical capability and legal obligation to carry out the order. The case highlights gaps in stablecoin regulation as scammers exploit instant transfers, leaving authorities unable to act in time. Tether has recovered over $1.1 billion through a similar burn-and-reissue process, putting pressure on Circle.
Circle, the issuer of the USDC stablecoin, faces scrutiny after Wisconsin prosecutors accused the company of refusing to comply with a court order aimed at recovering stolen cryptocurrency. The case involves a fraud where a Wisconsin resident was convinced by an online scammer to convert savings into about 381,000 USDC and transfer the funds to a fake investment platform.
Circle froze the assets after receiving a court order, but prosecutors say the company later refused a second order directing it to invalidate the frozen tokens and reissue an equivalent amount to law enforcement. Circle has asked the court to dismiss the complaint, arguing it neither had the technical capability nor the legal obligation to carry out the order.
The problem is unfolding as law enforcement tries to catch up with a string of crypto hacks. Stablecoins such as USDC are preferred for transferring money since they clear within seconds, leaving no time for authorities to act. Wisconsin prosecutor Thomas Binger said, “The tools that are at our disposal are not keeping up with the tools the criminals are using,” noting that investigators usually discover stolen assets only when they are no longer within reach. New York prosecutors recently brought charges against Circle after it failed to comply with requests for freezing or returning stolen USDC despite court intervention.
This case has brought into light the variations in policy among crypto organizations. Tether, the largest stablecoin issuer, has frozen approximately $4.7 billion involved in illicit behavior and recovered over $1.1 billion through destruction and replacement of tokens. Several blockchain commentators have proposed that Circle could adopt a similar burn-and-reissue process, though it remains unclear whether the company intends to do so.
The decision in this case could set a precedent on how much stablecoin issuers must assist law enforcement. If the lawsuit proceeds, the court’s ruling will determine whether crypto companies are required not only to freeze stolen cryptocurrency but also to actively help recover the funds for victims.
