Circle Accused of Refusing to Return Stolen USDC to Victims

In May 2025, a resident of Walworth County, Wisconsin fell victim to a romance scam: a scammer posing as "Lenora" convinced him to convert his savings into USDC and send it to a fake investment platform — around 381,000 tokens disappeared. In August 2025, Detective Scott Simons and local prosecutors obtained a court order to freeze the stolen funds, and Circle complied immediately, an ICIJ investigation reports.

But in December 2025, when prosecutors secured a seizure order requiring Circle to burn the stolen tokens and reissue an equivalent amount to the sheriff's office for return to the victim, Circle refused — citing technical limitations and saying it cannot perform burn-and-reissue operations on tokens sitting in third-party wallets.

In July 2026, following the ICIJ investigation's publication, Wisconsin prosecutors formally filed a criminal complaint against Circle for "intentionally disobeying, resisting, or obstructing" a court order, CryptoTimes reports. Circle has filed a motion to dismiss the complaint.

It's not an isolated case: blockchain researcher Yury Serov estimates Circle has at least $119 million in USDC frozen across various cases without being returned to victims. New York prosecutors separately accused Circle in January 2026 of continuing to earn interest income on frozen reserves, making it "financially preferable to freeze but not return funds" rather than actually doing so. By comparison, rival stablecoin issuer Tether uses a burn-and-reissue function and has already reissued $1.1 billion in tokens obtained through financial crime.

The upshot: a centralized stablecoin issuer's technical ability to "freeze" or "reverse" a transaction is not the same thing as its willingness to actually return the money to a victim — and the gap between those two things is turning into a legal battleground rather than a purely technical question.

This article is for informational purposes only and does not constitute investment advice.