Circle Sued Over Failure to Freeze $230 Million in USDC Linked to Drift Hack

Circle has been hit with a class-action lawsuit from investors who say it failed to freeze funds tied to the Drift Protocol hack.

Cointelegraph reported on June 16 that Drift investor Joshua McCollum filed the suit against Circle in federal court in Massachusetts. More than 100 investors joined the case, alleging that Circle did not intervene as the stolen funds were moved.

The hack occurred on April 1 and resulted in about $280 million in losses. Of that total, roughly $230 million of Circle’s USDC stablecoin was moved from Solana to Ethereum. Circle’s Cross-Chain Transfer Protocol, or CCTP, was used in the transfer.

The plaintiffs argue that Circle allowed its technology to be used for criminal activity and could have significantly reduced losses if it had acted in time. The lawsuit includes claims of aiding asset misappropriation and negligence. Damages will be determined at trial.

They also pointed to an earlier case in which Circle froze 16 USDC wallets in a separate civil matter before this incident. The plaintiffs said that showed the company had the technical ability to take similar action in this case but did not do so.

The case is expanding into a broader debate over how far crypto companies’ responsibilities extend. It has also raised questions over when firms with the power to freeze assets should step in, given the lack of clear standards.

Blockchain analytics firm Elliptic said the attack may have been carried out by a North Korea-linked hacking group. It said the hackers moved the funds through multiple transactions, converted them into Ethereum and then tried to launder the money through Tornado Cash.

Opinion remains divided over Circle’s response. Lorenzo Valente, head of digital asset research at Ark Invest, said freezing assets without a legal order could spark controversy over arbitrary decision-making. Such a move could also be interpreted as a political judgment, he added.