Key Takeaways
- Circle froze 16 unrelated USDC business hot wallets on March 23, 2026, due to a sealed U.S. civil lawsuit, disrupting exchanges, casinos, and forex platforms.
- ZachXBT criticized the broad action as incompetent, noting no clear links between wallets and calling for better on-chain review by Circle.
- Circle unfroze one Goated.com wallet holding 130,966 USDC on March 26 after backlash, with more expected to follow soon.
Circle, the issuer of the USDC stablecoin, recently triggered widespread concern in the crypto community by blocking and freezing USDC balances in 16 hot wallets belonging to active businesses.
Just days later, on Mar. 25, Circle began reversing course by unfreezing one of the wallets, raising fresh questions about the process behind such decisions and the risks of centralized control over stablecoins.
Circle Freezes, Then Unfreezes
Circle’s sudden decision to freeze 16 USDC wallets late on March 23 sent shockwaves across several businesses that rely on stablecoin liquidity to operate.
The action, tied to a sealed civil case in a New York court, caught multiple unrelated firms off guard.
Exchanges, online casinos, forex platforms, and payment processors all reported disruptions after their operational wallets were blacklisted.
What stood out was the lack of any clear link between the wallets.
They weren’t tied to a single entity or obvious illicit activity, but functioned as hot wallets handling routine user transactions.
The freeze immediately halted withdrawals, payments, and settlements, creating liquidity pressure across platforms and impacting users not connected to the case.
Circle has not shared details, citing the sealed nature of the proceedings.
However, on March 26, one wallet linked to Goated.com was unfrozen, restoring about 130,966 USDC.
ZachXBT flagged the update and suggested more reversals could follow.
For now, most wallets remain frozen, leaving affected businesses in limbo.
ZachXBT’s Calls Out Circle
ZachXBT, a well-known blockchain sleuth, broke the story and led the public scrutiny.
In a widely shared post on Mar. 24, he asked why Circle would freeze 16 unrelated operational hot wallets for a civil matter when basic on-chain review clearly showed they handled legitimate business activity.
In follow-up comments, ZachXBT called the freeze “potentially the most incompetent” he has seen in over five years of investigations.
He highlighted the sealed New York civil case, naming the plaintiffs’ lawyer from Willkie Farr and criticizing the judge and expert witness for what he viewed as a lack of blockchain expertise.
He argued that outsourcing freeze decisions to courts without internal technical review creates broad overreach and unnecessary harm.
ZachXBT also called out Circle CEO Jeremy Allaire directly for answers.
The blockchain sleuth stressed that the crypto community deserves transparency on why such a sweeping action occurred and how it will be prevented in the future.
His analysis resonated widely, amplifying concerns from other voices, such as MetaMask researcher Taylor Monahan, about accountability.
How Stablecoin Freezes Became Routine
This latest incident fits into a broader pattern in which both Circle and its rival, Tether, have frozen assets at the request of governments and law enforcement.
As centralized issuers, both companies maintain blacklist functionality in their smart contracts and comply with binding legal orders, often issued by U.S. agencies.
While such actions help combat crime, they also highlight the trade-off between compliance and the permissionless ideal many crypto users expect.
Circle has a documented track record.
In 2020, it blacklisted an address and froze roughly 100,000 USDC at the request of law enforcement.
In 2022, following U.S. Treasury sanctions on the Tornado Cash mixer, Circle blocked associated addresses, locking up tens of thousands of dollars in user funds held in sanctioned pools.
More recently, in May 2025, Circle froze approximately $57 million in USDC as part of a civil case tied to the LIBRA memecoin scam.
Tether, issuer of the larger USDT stablecoin, has conducted even more extensive freezes.
The firm reports freezing over $4.2 billion in USDT linked to illicit activity, with $3.5 billion of that occurring since 2023.
It has assisted the U.S. Department of Justice, the FBI, and the Secret Service with hundreds of requests.
Notable examples include:
- Freezing $435 million across 326 wallets in 2023.
- $61 million in USDT tied to “pig butchering” romance scams in early 2026.
- $225 million USDT in a major 2025 investment fraud case.
- $23 million USDT connected to the sanctioned Russian exchange Garantex.
Tether has also frozen funds related to ransomware, sanctions evasion, and darknet markets, often burning tokens after government seizure to facilitate recovery.
Prashant Jha is a seasoned crypto journalist based in Delhi, India, with a Bachelor’s Degree in Computer Science Engineering. Passionate about the evolving world of blockchain and cryptocurrencies, he has been a dedicated voice in the industry since 2018. Prashant’s expertise lies in regulatory reporting, where he unravels complex legal and financial developments with clarity and precision. Before joining CCN in 2024, he honed his craft at Cointelegraph, establishing himself as a trusted name in crypto journalism.
His coverage spans major industry events, including the high-profile collapses of FTX, Three Arrows Capital (3AC), and LUNA, offering readers insightful analyses of their regulatory and market implications. Prashant’s technical background enables him to bridge the gap between intricate blockchain technology and its real-world applications, making his work accessible to novices and experts.
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