Circle Hit With Criminal Complaint Over 381,000 Stolen USDC Tokens

USDC News

Wisconsin prosecutors have filed a criminal complaint against Circle, the issuer of USDC, alleging the company intentionally disobeyed a court order to recover roughly 381,000 stolen tokens for a local scam victim. The misdemeanor obstruction-of-justice charge, unusual against a firm of Circle’s size, sharpens a broader dispute over how much responsibility stablecoin issuers bear for clawing back illicit funds. At the center is a simple question: why does the world’s second-largest stablecoin issuer appear less willing than its rivals to help law enforcement recover money once it settles on-chain. Circle disputes the allegations and has moved to dismiss the case outright.

The dispute traces back to a romance scam in Walworth County. In May 2025, a resident received an unsolicited text from a scammer using the name Lenora, who posed as a romantic partner and steered part of his savings into USD Coin (USDC) on a bogus investment platform. Investigators traced roughly 381,000 tokens to a fraudulent wallet. Court records show a county judge ordered Circle to freeze the funds in August 2025, and the company complied promptly. The case illustrates a recurring pattern flagged by law enforcement, where victims funnel dollar-pegged tokens through fake platforms via compromised crypto wallets before detection.

The conflict escalated in December, when the same court ordered Circle to invalidate the frozen tokens and reissue an equal amount of fresh USDC to the sheriff’s office. Circle refused, arguing it does not have the technical ability to burn and reissue tokens sitting inside a third party’s wallet. Prosecutors responded with the misdemeanor charge against the roughly $17 billion firm. In its motion to dismiss, Circle called the complaint meritless, cited a lack of jurisdiction in the Wisconsin court, and said prosecutors ignored alternative compensation proposals it had offered the victim.

The Wisconsin case is not isolated. New York prosecutors have told U.S. senators that Circle generally requires court orders before freezing USDC and has not consistently returned stolen funds even after courts approved their release. A Milwaukee County detective, Scott Simons, said Circle declined freeze requests or received orders too late in more than a dozen cases. Because stablecoin transfers settle within seconds while legal paperwork takes days, investigators argue the window to recover funds often closes long before an order arrives. Walworth County prosecutor Thomas Binger said the tools available to police are not keeping pace with those used by criminals.

The complaint has revived comparisons with Tether, issuer of the larger USDT stablecoin, which honors some law enforcement requests without a court order and says it has frozen about $4.7 billion linked to crime. Tether’s software can destroy tokens in criminal wallets and issue replacements, a mechanism it says has returned $1.1 billion to victims. Its T3 unit with TRON has frozen over $450 million, and U.S. prosecutors seized $61 million in illicit USDT in a single case. Circle, listed on the NYSE in June 2025, maintains the gap reflects differing policy and legal thresholds rather than any inherent limitation of blockchain technology.

The stakes extend well beyond one Wisconsin courtroom. The FBI logged a record $11.4 billion in crypto fraud losses for 2025, with more than 18,500 victims each losing over $100,000, even as detection struggles to keep up with AI-driven scams. As stablecoins move deeper into mainstream payments, the case tests whether issuers can be compelled to act as recovery agents, or whether that role remains bounded by validated legal orders. For an asset class built on instant settlement, the mismatch between second-by-second transfers and slow legal process is emerging as a defining policy fault line.

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