Key Takeaways
- Circle faces a class-action suit for failing to freeze stolen USDC after the Drift Protocol hack.
- The lawsuit claims Circle allowed $230 million in hacked funds to move via its CCTP bridge.
- Plaintiff Joshua McCollum seeks damages for users harmed by Circle’s alleged inaction.
Circle, the second-largest stablecoin issuer, is facing a class-action lawsuit over its refusal and alleged inability to freeze funds from the Drift hack.
On Apr. 14, investor Joshua McCollum filed the suit in the US District Court in Massachusetts on behalf of more than 100 affected users.
Drift Investors Want Accountability from Circle
The lawsuit, led by Gibbs Mura law firm, claims Circle negligently allowed stolen funds to move through its infrastructure.
Lawyers argue that Circle had both the technical capability and contractual authority to freeze the USDC addresses but chose not to act.
“These losses would not have occurred, or would have been substantially reduced, had Circle taken timely action,” the complaint stated.
Plaintiffs accuse the company of enabling criminal use of its technology and are seeking compensation for damages.
Critics also point out that Circle froze unrelated business wallets days earlier in a separate civil matter, suggesting it could act quickly when required.
During the Drift incident, however, the company remained silent even as blockchain observers flagged suspicious flows in real time.
The lawsuit frames this as a breach of duty to users who relied on USDC’s stability and security.
Legal experts say the case could set a precedent for how stablecoin issuers respond to exploits, particularly when their own infrastructure is involved.
What Happened in the Drift Hack
The case stems from the Apr. 1 Drift exploit, one of the largest DeFi incidents of the year.
Attackers drained roughly $280 million from trading positions, lending pools, and user vaults in a rapid operation widely linked to North Korea-backed actors.
Within hours, much of the stolen funds were converted into USDC.
Around $230 million was then bridged from Solana to Ethereum using Circle’s Cross-Chain Transfer Protocol (CCTP).
The transfers were executed across more than 100 transactions over a six- to eight-hour period.
Circle’s Position on Freezing Funds
Circle has pushed back against criticism, outlining its policy on asset freezes.
Chief Strategy Officer Dante Disparte stated that the company does not freeze USDC at its own discretion.
“When Circle freezes USDC, it is not because we have decided, unilaterally or arbitrarily, that someone’s assets should be taken from them. It is because the law requires us to act,” he said.
A company spokesperson added that Circle operates under regulatory frameworks and only acts on sanctions lists, law enforcement requests, or court orders.
The firm argued that freezing funds without legal backing could expose it to liability, especially if legitimate users are affected.
Executives described the Drift situation as a difficult balance between acting quickly and maintaining due process.
Circle has called for clearer legislation, including proposals like the GENIUS Act and CLARITY Act, to allow faster responses during active exploits.
Until then, the company says it must rely on formal legal directives.
This stance, while consistent with US and European regulations, has frustrated parts of the crypto community, who argue that Circle had both the tools and time to intervene.
A Pattern of Delayed Action?
The Drift incident is not the first time Circle has faced criticism over delayed freezes.
On-chain investigator ZachXBT has previously pointed to roughly $420 million in illicit USDC flows since 2022 that were not immediately blocked.
Examples include a $9 million theft from the GMX DEX hack in July 2025 and delayed action following the $200 million Cetus exploit in May 2025.
In that case, wallets were blacklisted only after funds had already moved to Ethereum.
Observers see a pattern where stolen funds move quickly through bridges before any freeze is applied.
At the same time, Circle’s earlier action against unrelated wallets in a civil case has raised questions about consistency.
Critics argue that a strict legal-first approach, while protecting due process, may give attackers a window to move funds beyond reach.
Tether Steps In
While Circle faces legal pressure, rival stablecoin issuer Tether has moved to support Drift.
On Apr. 16, Tether announced a $150 million recovery plan, including up to $127.5 million from its own reserves and $20 million from partners such as the Solana Foundation.
The funding aims to reimburse users, strengthen security, and relaunch the protocol.
As part of the agreement, Drift will transition its core settlement layer from USDC to USDT.
Future platform revenues will also contribute to a recovery fund.
Tether CEO Paolo Ardoino described the move as part of its broader role in supporting the ecosystem during crises.
“Tether’s role in the digital assets ecosystem is to provide a platform for individuals and institutions alike that is ready to step forward to help the industry in the moment of darkness,” he said.
The shift brings more than 128,000 users and multiple ecosystem teams onto USDT-based infrastructure.
For many observers, the move highlights a contrast in approach—while Circle emphasizes regulatory constraints, Tether has positioned itself as more responsive during incidents.
Top Trending Crypto Articles
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.
Beyond his professional pursuits, Prashant is an avid music enthusiast, often exploring diverse genres to unwind. A sports lover, he has a particular passion for cricket and frequently engages in discussions about the game. His multifaceted interests and sharp journalistic instincts make him a valuable contributor to CCN, where he continues shaping the crypto landscape's narrative.
