USDC freeze failures: ZachXBT accuses Circle of missing $420M+ since 2022
On-chain investigator ZachXBT alleges USDC freeze failures by Circle, claiming the issuer failed to freeze or blacklist illicit funds in at least 15 hack-and-fraud cases since 2022. He argues attackers moved or converted stolen USDC before any freeze could take effect, including: about $9M after the July 2025 GMX DEX hack; roughly $200M in the May 2025 Cetus hack where blacklisting came only after USDC was converted to ETH; and ~$232M allegedly left unfrozen in the recent Drift Protocol hack despite a six-hour window with 100+ USDC→ETH transactions.
ZachXBT estimates his “$420M-plus” figure covers major public cases and may be higher overall. Circle has the technical ability to freeze assets and blacklist addresses, but ZachXBT says enforcement was “minimal” or absent despite law-enforcement and private-sector requests. Cointelegraph reports it reached out to Circle but received no immediate response.
The dispute also echoes Circle leadership comments from Sept. 2025, when president Heath Tarbert said the company was exploring “reversible” USDC transactions to roll back amended activity in hacks, theft, and fraud. For traders, repeated USDC freeze failures can raise perceived counterparty risk around centralized stablecoin controls, potentially affecting stablecoin liquidity preferences and risk management in volatile or hack-prone periods.
Bearish
This report highlights alleged USDC freeze failures during major DeFi thefts. Even without direct price data, the focus on failed/late freezes can reduce confidence in centralized stablecoin enforcement, increasing perceived counterparty risk. In the short term, traders may tighten risk controls around USDC exposure and counterparties involved in fast-moving hack flows. In the long term, repeated claims could pressure the market to demand stronger compliance infrastructure (e.g., faster freezing, anomaly detection, or reversible mechanisms), which may keep sentiment soft. Overall, the likely effect on USDC’s perceived risk is negative, making the impact on price sentiment skew bearish.