Wisconsin prosecutors have filed a criminal complaint against Circle, the issuer of USDC, after the company refused to invalidate and reissue 381,000 stolen stablecoins despite a court order. The misdemeanor charge stems from a romance scam in Walworth County, where a victim was duped into sending approximately 381,000 USDC to a fraudulent investment platform.
Investigators traced the funds and obtained a warrant ordering Circle to freeze the associated wallet, which the company did immediately. However, when a later court order directed Circle to destroy the frozen tokens and mint fresh USDC for the Walworth County Sheriff’s Office to return to the victim, Circle pushed back. The firm argued it lacks the technical capability to burn and reissue USDC held in third-party wallets without smart contract changes, and that it had already proposed alternative compensation plans.
The case, revealed in an ICIJ investigation published July 8, has ignited a broader debate over stablecoin issuers’ responsibility to assist law enforcement. New York prosecutors separately told U.S. senators that Circle consistently demands formal court orders before freezing USDC, often allowing scammers to move funds out of reach during the legal delay. They also alleged Circle earns interest on reserves backing frozen assets, a claim the company rejects.
The complaint underscores a stark contrast with Tether. Between 2023 and 2025, Tether froze about $3.3 billion in USDT across more than 7,200 wallets, while Circle froze just $109 million in USDC — a thirtyfold gap. Tether’s model allows it to destroy frozen tokens and reissue clean ones to victims or authorities, a process it says has already returned about $1.1 billion. Circle disclosed it has discussed similar victim-compensation arrangements with federal prosecutors but has not implemented a public-facing process.
Blockchain researcher Yury Serov estimates at least 119 million USDC remains frozen, backed by reserves but in limbo. A crypto forensic expert told ICIJ that Circle could update its smart contracts to enable burning and reissuing, but the company did not respond to that suggestion. Milwaukee County detective Scott Simons said he has worked on more than a dozen cases where Circle either declined early freeze requests or the court order came too late, leaving victims with nothing.
