TL;DR
- On-chain investigator ZachXBT accuses Circle of failing to freeze over $420 million in stolen USDC funds since 2022
- 15 documented cases have been presented, including the Drift hack ($232 million) and the Bybit hack ($1.5 billion total)
- Circle claims freezing requires legal process — ZachXBT believes the company had time to act but chose not to
- Circle has not yet directly commented on the allegations
ZachXBT Attacks Circle for Systematic Inaction
The pseudonymous on-chain investigator ZachXBT has strongly criticized Circle, the company behind the USDC stablecoin, claiming that a lack of adherence to its own compliance obligations has cost the crypto market over $420 million. According to Cointelegraph, ZachXBT documents 15 separate instances since 2022 where he believes Circle had the time and technical capacity to freeze illicit funds but chose not to act.
ZachXBT emphasizes that Circle itself has built-in freezing functionality in the USDC contract, and that the company's own terms of service explicitly reserve the right to block addresses linked to criminal activity.
"Circle uses buzzwords like 'compliance' and 'regulated' without real implementation" — ZachXBT
The Most Serious Cases
The Drift Protocol Hack (April 2026)
The freshest and most serious example is the hack of Drift Protocol, where ZachXBT claims Circle had a six-hour window to act while approximately $230–232 million in USDC was bridged from Solana to Ethereum via Circle's own Cross-Chain Transfer Protocol (CCTP). No funds were frozen during this period, according to the investigator's review.
The Bybit Hack (February 2025)
After the North Korean Lazarus Group stole an estimated $1.5 billion in crypto from the Bybit exchange, competitor Tether reportedly froze associated addresses within hours. Circle, however, allegedly waited an additional 24 hours before acting — and then only on 338,000 USDC. A later review indicated that Circle took six months to fully freeze Lazarus-linked addresses.
SwapNet, GMX, and Cetus
In the SwapNet case, $3 million in USDC remained untouched in the hacker's address for two days, despite alleged freezing requests from both law enforcement and private entities. In the GMX hack in July 2025, ZachXBT claims that $9 million in USDC was never frozen. In the Cetus DEX case — where total losses amounted to $200 million — Circle reportedly only blacklisted wallets after the USDC had already been converted to Ether.
Circle's Defense: Legal Process is Necessary
Circle CEO Jeremy Allaire has previously stated that the company acts on requests from law enforcement — and that freezing requires a formal legal process. As of today, Circle has not published any direct response to ZachXBT's specific allegations, according to available information.
This is a central point of tension in the debate: ZachXBT believes Circle had sufficient information and time to act on its own initiative in many cases, while Circle's management seemingly insists that external authority must be the basis.
USDC: A Regulated Product with Growing Influence
The contrast to the allegations is striking in light of USDC's growth. As of March 30, 2026, the stablecoin had a circulating supply of approximately $77.3 billion, and Circle reported revenues of $1.68 billion for 2024 — largely driven by interest income from its reserves. The company is licensed as a money transmitter in New York and operates under the MiCA regulatory framework in Europe.
ZachXBT is clear that he does not dismiss Circle as an actor: he himself states that he holds USDC. But he distinguishes between product quality and compliance practices, concluding that repeated inaction over three years has had "real consequences for real people".
What Happens Next?
The case will likely put pressure on Circle during a period when the company is reportedly preparing for a stock market listing in the US. The allegations from one of the crypto industry's most recognized on-chain investigators — with detailed documentation and timelines to back them up — are harder to dismiss than anonymous rumors.
Whether Circle chooses to respond publicly, and if so, how, will be crucial in determining whether the case remains an industry internal discussion or develops into something regulatory authorities in the US and Europe will address.
Source: Cointelegraph
