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Ahmed Barakat
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A lawsuit filed by Wisconsin prosecutors against Circle, the company behind USDC, has also raised an uncomfortable question. Why does the world’s second largest stablecoin issuer seem less willing than Tether to help authorities recover stolen funds?
An ICIJ investigation published on July 8 points to three factors at the root of the conflict. Circle insists that it freezes funds only after receiving legal orders, disputes that it can burn and reissue stolen tokens, and rejects claims by New York prosecutors that it profits by leaving cold assets untouched. Meanwhile, critics say the policy leaves victims waiting while their money goes missing.
The case began with a love scam in Walworth County, Wisconsin. A resident identified as “Victim #1” determined to purchase USDC and send approximately 381,000 tokens to what turned out to be a fake platform. After detectives traced the money, a judge ordered Circle to freeze the wallet. The company did so without hesitation.
A few months later, the court took action. It ordered Circle to cancel the frozen tokens and issue a new USDC equivalent to the Walworth County Sheriff’s Office. Circle refused, saying that it does not have the ability to burn and re-issue USDC in someone else’s wallet. Critics responded with wrongdoing, an unusual move for a company of Circle’s size.
Circle then asked the court to dismiss the case. It also said the Wisconsin court lacked jurisdiction and said prosecutors ignored other recommendations they made to pay the victim. Walworth County Attorney Thomas Binger said the incident shows how quickly scammers can move money compared to the speed of law enforcement.
The Wisconsin case is not the only one that is raising questions. Earlier this year, prosecutors in New York told US authorities that Circle often sought a court order before USDC closed and did not return stolen funds after the courts agreed to release them. Since stablecoin transfers are settled in seconds, researchers argue that the necessary time is often lost before legal documents are completed.
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Debate on Freezing Money
Prosecutors in New York also filed the most serious charges. He added that Circle continues to earn interest on its USDC-backed assets, leaving the company with less cash to quickly repay the investment. The court did not accept the claim.
Blockchain researcher Yury Serov estimates that at least 119 million USDC are currently frozen. These tokens cannot be moved, but remain supported by the stored property unless otherwise removed.
The technical description of the Circle has also drawn criticism. Joshua Cooper-Duckett of Cryptoforensic Investigators told ICIJ that the company could modify its smart contracts to facilitate burning and re-issuing tokens that reside in third-party wallets. Circle did not respond when asked if it would change.
One point from the court documents caught the attention of researchers. Around revealed that it had already negotiated compensation with federal prosecutors that involved freezing the stolen tokens before issuing USDC instead. The company did not say whether the system works outside the state.
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Circle USDC vs. Tether’s Model is 30x Gap
The difference between Circle and Tether is hard to ignore. AMLBot data shows Tether froze about $3.3 billion in USDT across more than 7,200 wallets between 2023 and 2025. Circle froze about $109 million in USDC over the same period, a 30-times difference in value.
One of these differences comes from Tether’s method of burning and re-issuing. After freezing the stolen USDT, the company can destroy the tokens and give them in a clean environment to law enforcement or victims.
Tether is said to have already released about $1.1 billion and frozen $4.7 billion linked to illegal transactions. work. Circle does not currently offer these same options to third parties, although their court filings show that they have discussed similar issues with government officials.
Companies also draw the line in different areas. Tether has said that it sometimes takes action before the courts are involved if the government asks for help. Circle says it only responds through legal guidelines, arguing that the process protects users from false or politically motivated content. Analysts argue that by the time the laws arrive, the stolen crypto is often gone.
Milwaukee County Coroner Scott Simons told ICIJ that he has worked on more than a dozen cases where Circle denied a request for an early adjournment or where the court arrived late. For many victims, he said, the answer is simply that the money is gone.
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