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- The dispute centered on Circle’s decision to suspend Heka Funds’ access to USDC redemptions during Silicon Valley Bank’s crisis.
- The judge found that Heka failed to explain how he came to own money and Tether.
- Heka’s claim for $49 million in damages was dismissed, while Circle was awarded legal and expert fees.
- This case highlights the importance of transparency and peer-to-peer risk in stablecoin markets.
According to the Financial TimesCourt documents made public this week shed new light on the private dispute between Circle and Heka Funds, detailing what led the USDC issuer to suspend the fund’s redemption opportunities for the troubled 2023 Silicon Valley Bank.
The documents form part of Circle’s efforts to have the arbitration award upheld after it expires in February 2026. Although the outcome was previously known, the supporting documents reveal confidential evidence previously presented in the case.
Group Raises Concerns Over Heka’s Business Practices
According to information, Circle was affected after Heka redeemed a large amount of USDC while the stablecoin temporarily traded below its dollar peg following the collapse of Silicon Valley Bank.
The company said the buyout was not an afterthought. Instead, it said that the money is going towards Tether, boosting USDT at a time when confidence in USDC has waned.
A major issue in the debate was Heka’s relationship with Tether.
Evidence presented during the trial showed:
- Tether has invested about $800 million in Heka, which represents about 75% of the fund’s assets.
- Tether withdrew some USDT funds for the fund.
- The board said that Heka’s actions in establishing their relationship with the company should have been disclosed.
The USDC issuer maintained that knowledge of Heka’s relationship with Tether would have changed its risk assessment in evaluating the redemption relationship.
Judge Finds Heka Acted in Bad Faith
Retired Judge Robert Dondero, who presided over the hearing, ruled in Circle’s favor.
According to the ruling, Heka deliberately failed to disclose her relationship with Tether despite realizing that doing so would have raised what the judge described as “bells and whistles of concern” within Circle.
The ruling rejected Heka’s claim of $49 million in lost revenue and ordered the fund to reimburse Circle for approximately $166,000 in legal and professional fees.
Heka has refused to participate in the market and confirms that it has never been investigated. The company has also said that Circle’s efforts to make the show more transparent to quell the interest in questions. around the USDC care during SVB crisis.
The Case Goes Beyond a Contractual Dispute
While the dispute focused on contractual practices rather than market manipulation, the newly revealed documents provide a rare glimpse into how stablecoin issuers managed their partner organizations during one of the most difficult times.
This trend also shows how redemption relationships have become an important risk management tool for stablecoin issuers. In addition to stockpiling, companies also closely monitor who is getting the buybacks and how the buybacks will affect market changes.
As the stablecoin market continues to attract greater institutional participation and regulatory oversight,
