Circle’s Epic Fail: 16 Legit Wallets Frozen While North Korea Gets a Pass!

by

Oh, the drama! Onchain investigator ZachXBT has just blown the whistle on Circle, the issuer of USDC, accusing them of a spectacular compliance disaster, failing to freeze over $420 million in illicit stablecoin flows. Apparently, the firm just sat back and let fraud, hacks, and even North Korean cybercriminals run riot across 15 cases since 2022. Oops, did we miss that?

Key Takeaways (you’ll want to keep these in mind, trust me):

  • ZachXBT found 15 cases where Circle failed to freeze a total of $420M in dodgy USDC. Nice one, Circle!
  • In the Drift Protocol exploit (April 1, 2026), $232M was bridged in six hours, and Circle didn’t lift a finger to freeze it. All during U.S. business hours. How very convenient.
  • Circle froze a whopping 16 “legitimate” wallets in March 2026 during a civil case. But don’t worry, 5 of those wallets were unfrozen. Because… reasons?

Did Circle Totally Drop the Ball on Freezing Stolen USDC? ZachXBT Thinks So!

ZachXBT took to X with a thread that spilled all the tea, laying out hack after hack where Circle just couldn’t be bothered to freeze stolen USDC. Despite having the ability and the legal authority, Circle didn’t act-talk about a “compliance fail” that could win awards. We’ve got receipts, people. Blockchain addresses, timelines, law enforcement comms-ZachXBT went all out.

One of the most memorable (or should I say, unforgettable?) cases was the Drift Protocol exploit on April 1, 2026. Hackers, allegedly part of North Korea’s Lazarus Group, bridged $232 million from Solana to Ethereum using Circle’s Cross-Chain Transfer Protocol (CCTP). And guess what? Circle didn’t freeze a penny. They were probably too busy having a meeting about “compliance strategy.”

Then there’s the Swapnet exploit from January 25, 2026, where $16 million got snatched. Circle let $3 million sit there for two days while law enforcement and private investigators begged for a freeze. Nope. The funds were happily swapped out before anyone could blink. Classic Circle!

Don’t even get me started on the Cetus Protocol hack (May 22, 2025). $223 million gone in the blink of an eye, and $61 million bridged via Circle’s protocol in just 90 minutes. Circle, being its usual self, took a whole month to blacklist the funds-by which point, they had already been turned into Ether. So much for “keeping crypto safe.”

Oh, and did I mention the Mango Markets hack from October 2022? $57.5 million routed through a Circle deposit address, and Circle did absolutely nothing. Maybe they were busy… I don’t know… organizing their crypto investment portfolio?

According to ZachXBT, Circle took a shocking 4.5 months longer than Tether and Paxos to freeze addresses linked to Lazarus Group (April 2024 report). They also dropped the ball when it came to Garantex, a sanctioned Russian exchange. Over 200,000 USDC went untouched, while Tether froze $22 million. Real team effort, Circle. Real team effort.

Circle’s defense? They say they only freeze assets when the law forces them to. Preemptive freezing, they argue, would expose them to liability and violate user rights. Fair enough. But maybe-just maybe-they could be a little more proactive when billions of dollars in illicit activity is happening on their watch?

ZachXBT did acknowledge that Circle builds quality products and that he personally holds USDC. But the guy’s not blind. He’s just wondering if Circle’s “compliance” priorities align with the millions of dollars lost while they sit on their hands.

The 16 “Legitimate” Wallets That Got Frozen (Oh, The Irony!)

Now, here comes the cherry on top of this messy cake: Circle froze 16 unrelated business wallets in March 2026. And-wait for it-these wallets belonged to actual legitimate companies like crypto exchanges, online casinos, and a smart contract for DFINITY Foundation’s ckETH Minter. Turns out, these wallets had no connection to the sealed U.S. civil case at all. Oops. A quick glance at the blockchain could’ve saved everyone some embarrassment. But hey, why bother with “details” when you can make the headlines?

At least five wallets were unfrozen later, including the DFINITY contract and Goated.com’s wallet with $131,000 USDC. More reversals were expected-because, obviously, they didn’t get it right the first time. But don’t worry, Circle hasn’t commented publicly on ZachXBT’s allegations, probably because they’re too busy “assessing” the situation.

So, as the saga unfolds, the question remains: How does Circle, a U.S.-regulated stablecoin issuer, balance the legal stuff with the real-world impact of illicit transactions happening in its ecosystem? Maybe they need to rethink their “do nothing until legally forced” policy. Just a thought!

Read More

2026-04-04 20:58