Key Highlights
- Circle froze 16 active USDC wallets belonging to normal businesses, including exchanges, casinos, and forex platforms, due to an ongoing U.S. civil case.
- ZachXBT criticized the freeze, saying the wallets were clearly operational business accounts and that the request was not properly reviewed.
Blockchain investigator ZachXBT questioned Circle, the issue of USDC, in a post on X over its decision to freeze 16 wallets belonging to normal businesses late yesterday due to an ongoing U.S. civil case.
These wallets were clearly used for daily business operations, including exchanges, casinos, and forex platforms. According to ZachXBT, he did a review of the wallets and found out that they do not appear connected.
ZachXBT criticized the firm, asking why the wallets were blocked without a clear review, raising concerns about how Circle assessed the request under pressure.
ZachXBT criticized Circle for freezing the wallets
On his Telegram channel, ZachXBT said he spoke directly with one of the affected businesses, which confirmed the freeze resulted from the civil case.
“I spoke with one of the affected businesses directly and they stated it was due to an ongoing US civil case whose details are not yet disclosed. I reviewed the onchain activity and the exchanges, casinos, forex businesses do not appear to be related at all to each other,” he said.
ZachXBT criticized the move, stating that the request to freeze the wallets “was riddled with errors” and that Circle failed to properly review it.
“How come Circle froze the USDC balance of 16 unrelated hot wallets late yesterday for a civil case? A basic review of onchain activity makes it obvious they are operational wallets.” ZachXBT said on X.
He added that “an analyst with basic tools could have identified within minutes that these were operational business wallets from the thousands of transactions they process.” According to him, the actions have negatively impacted the normal operations of the affected businesses.
He further explained that companies often use hot wallets to process the bulk of transactions for their users. Now, their business operations have been negatively impacted by Circle, Lawyer, Forensics firm, & judge,” he said.
Community reaction
Circle has not responded publicly to ZachXBT’s questions. However, the firm has faced backlash over the issue.
Under ZachXBT’s comment, one user posted an image that suggests that the firm does nothing when it comes to freezing the wallets of hackers, especially the North Korea hackers, but went on to freeze “16 random business hot wallets.”
Another user said that the freeze was likely due to pressure from U.S. authorities, saying the inputs in the case were “not adequate still,” and pointed out previous instances where Circle did not act even when case inputs were sufficient without authority pressure.
Circle stock drops 25% in a day
Meanwhile, the development comes as the firm’s stock dropped about 25% during early trading hours today after the draft version of the U.S stablecoin law raised questions about limits on Yield.
At the time of writing, the stock is trading at $100, down from an intraday high of $126. In the comments, ZachXBT clarified that his post wasn’t the cause of the decline, but rather developments around the proposed law.
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