- Circle faces a class action lawsuit from Drift Protocol investors over its handling of a $285 million Solana hack in April.
- The lawsuit alleges Circle failed to freeze $232 million in stolen USDC as it moved through its own cross-chain infrastructure.
- CEO Jeremy Allaire defended the inaction, stating the company only freezes assets when legally required to avoid a “significant moral quandary.”
- Meanwhile, Tether committed to helping recover funds, positioning itself as a more responsive industry partner.
Stablecoin issuer Circle was hit with a class action lawsuit in mid-April from investors who lost funds in a massive $285 million exploit of the Drift Protocol on April 1. The legal action targets Circle’s decision not to freeze stolen USDC during an eight-hour window after the attack.
The suit centers on the Hackers‘ movement of $232 million from Solana to Ethereum using Circle’s Cross-Chain Transfer Protocol. Attackers had exploited Drift weeks before using a legitimate Solana feature called “durable nonces,” according to a technical report. Drift later linked the sophisticated, six-month infiltration to North Korean state-affiliated hackers.
Consequently, the firm faced sharp criticism from within the crypto community. Prominent investigator ZachXBT publicly questioned why businesses should build on Circle when a major protocol received no support during the incident.
Circle leadership firmly defended its position, citing legal and ethical constraints. A company spokesperson stated, “Circle is a regulated company that complies with sanctions, law enforcement orders, and court-mandated requirements.” CEO Jeremy Allaire earlier warned that unilateral freezing creates a moral dilemma.
Meanwhile, Drift Protocol secured recovery commitments, including up to $127.5 million from Tether. Tether CEO Paolo Ardoino positioned his firm as ready to help the industry in its “moment of darkness.”
The lawsuit amplifies broader concerns about stablecoins and illicit finance. TRM Labs data shows approximately $141 billion in stablecoin transactions last year were linked to illicit activity.
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