ZachXBT Calls Out Circle for Wrongful Freeze of 16 Business Wallets

Circle Froze Wallets of Uninvolved Businesses

USDC issuer Circle blocked 16 cryptocurrency wallets as part of a civil lawsuit in the United States. On-chain sleuth ZachXBT investigated the affected addresses and determined that they belong to entities entirely unrelated to the legal proceedings in question.

After examining the activity of the impacted companies, ZachXBT found no connections between them. He argued that an analyst with basic tools could have identified these as operational business wallets within minutes, given the thousands of transactions they process.

Why This Matters

The incident highlights a fundamental vulnerability of centralized stablecoins: an issuer can unilaterally freeze user funds based on a court order, even when the grounds for such action appear questionable. For businesses relying on USDC for day-to-day operations, erroneous freezes pose direct financial risks and erode trust in stablecoin infrastructure. The case raises pressing questions about due diligence standards and accountability in the stablecoin ecosystem.

Inside ZachXBT's Investigation

According to ZachXBT, the civil case that triggered the freeze is sealed, and Circle provided no objective basis for blocking the stablecoins held at the targeted addresses.

"The NY civil case is sealed and they have provided absolutely ZERO basis to freeze all of these business addresses. Aaron Nathan from Willkie Farr is the unknown plaintiffs lawyer. The expert witness is liable. The judge is liable. Circle is liable. In my 5+ yrs of…" — ZachXBT (@zachxbt), original post

The investigator described the episode as the most incompetent freeze he has witnessed in over five years of on-chain research. He attributed the problem to outsourcing freeze decisions to a random federal judge rather than building a proper internal review process.

Community Backlash

MetaMask wallet developer Taylor Monahan echoed the criticism, noting that this type of incident is neither new nor likely the last for Circle.

"It's always been this way for Circle. If you can convince a US federal court to sign off on a freeze then the funds will be frozen. This most often comes up when Circle REFUSES to freeze uncommingled stolen funds that come direct from the victim. Their non-decision making…" — Tay 💖 (@tayvano_), original post

Monahan stressed the absence of accountability, oversight, or recourse mechanisms for affected users when such freezes occur.

Circle's Silence and Current Status

As of publication, Circle has not issued any official statement regarding the incident. ZachXBT noted that the company quietly unfroze one of the 16 wallets without providing any explanation. Market participants are awaiting formal clarification from the USDC issuer.

The controversy comes at a turbulent time for Circle. On March 24, the company's shares dropped 20% amid concerns related to the latest version of the Clarity Act bill.