On-chain sleuth ZachXBT alleges Circle failed to freeze $420M in stolen USDC across 15 cases, including major exploits like Drift Protocol and GMX.

Recent allegations are calling into question the effectiveness of control mechanisms and the accountability of centralized players within an otherwise decentralized ecosystem.

According to ZachXBT, although Circle possesses the technical capability to block addresses and freeze assets, the company has taken “minimal” action or failed to respond entirely in at least 15 cases involving hacks and scams. Some of these incidents are associated with state-sponsored groups from North Korea, which intensifies the gravity of the accusations regarding global cybersecurity.

Among the specific examples mentioned is the GMX incident from July 2025, where approximately $9 million in USDC remained unfrozen. In a separate case involving Cetus in May of the same year, Circle reportedly took action only after the funds had already been converted into Ethereum—a move that effectively neutralized the impact of the intervention.

The most significant case highlighted by the analyst involves Drift Protocol, where he claims approximately $232 million was left unfrozen. Attackers managed to move the funds within a six-hour window through more than 100 separate transactions without meeting any substantial resistance.

The Debate Over Centralized Issuers

This situation has sparked a broader debate within the crypto community regarding the role of centralized entities like Circle. While stablecoins such as USDC are vital tools for market liquidity and stability, their ability to exercise control over funds raises questions about the balance between security and decentralization.

Critics argue that a lack of timely intervention erodes trust in the system and exposes users to additional risk. According to ZachXBT, these losses “have real consequences for real people,” noting that the $420 million figure only includes publicly known cases, meaning the actual total is likely significantly higher.

Circle has not provided an immediate comment on the allegations, leaving room for speculation regarding its internal processes and the criteria used for intervening in suspicious transactions.

Potential Solutions and Future Mechanisms

Amid the mounting criticism, the company has already signaled potential changes. In September 2025, Circle President Heath Tarbert stated that the firm is exploring options for “reversible” USDC transactions—a mechanism that would allow for the cancellation or adjustment of transfers in proven cases of fraud or theft.

Such functionality would represent a major evolution in stablecoin design, though it could also deepen concerns regarding centralization and the control over digital assets.

Circle has a history of freezing funds, including actions taken against addresses linked to the Office of Foreign Assets Control (OFAC) following sanctions against Tornado Cash in 2022. This demonstrates that the company possesses the necessary tools; the question remains as to when and how it chooses to deploy them.

As the number of hacks and exploits in the crypto space continues to rise, pressure on stablecoin issuers will likely intensify, making them a deciding factor in the security of the digital financial system.