- Circle faces a lawsuit after $230M USDC moved across chains without a freeze during the exploit.
- Prior wallet freezes cited as proof that Circle could act but did not intervene in time.
- Drift Protocol will switch from USDC to USDT settlement upon relaunch.
A class action lawsuit has been filed against Circle Internet Group following its response to a large-scale exploit involving Drift Protocol, in which investors claim the company failed to act while stolen funds were being moved. The case centers on whether Circle had both the technical ability and responsibility to intervene as attackers transferred millions in stablecoins across blockchains.
The complaint was filed in a Massachusetts district court by investor Joshua McCollum on behalf of more than 100 affected individuals. It alleges that Circle allowed approximately $230 million in USDC to be transferred from the Solana network to Ethereum through its Cross-Chain Transfer Protocol (CCTP) without interruption.
The funds were part of a bigger exploit estimated at around $280 million that occurred on April 1. According to the filing, the transfers took place over several hours, during which Circle did not freeze or restrict the movement of assets. Legal representatives argue that timely intervention could have reduced or prevented losses.
The lawsuit accuses Circle of aiding and abetting conversion and negligence. The plaintiffs are seeking damages, with the total amount to be determined at trial.
Prior Freezes Raise Questions on Capability
Attorneys representing the investors pointed to a prior instance where Circle froze 16 USDC wallets linked to a sealed U.S. civil case roughly one week before the Drift exploit. They cited this action as evidence that the company had the technical capacity to halt suspicious transactions under certain conditions.
Blockchain analytics firm Elliptic indicated that the exploit may be linked to North Korean state-backed actors. The firm reported that over 100 transactions were executed using Circle’s bridging infrastructure during U.S. working hours.
Separately, ARK Invest’s digital assets research division director, Lorenzo Valente, stated that intervening without a legal mandate could introduce broader risks, particularly in relation to discretionary enforcement.
In response to the exploit, Drift Protocol is expected to discontinue support for USDC and transition to USDT for settlement operations upon relaunch.
Related: Circle Breaks Silence on $270 Million Drift Exploit
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